We have all heard about Inheritance Tax but quite often we do not understand what it means or how it will impact us. Again, read on if you wish but Inheritance Tax is complicated, and very careful planning is needed, so perhaps just contact us and we will be happy to help.
Inheritance Tax is a tax on the Estate of a person who has died, where their Estate is valued over certain limits. In the tax year from the 6th April 2019 to 5th April 2020, the Inland Revenue received £5.2 billion in Inheritance Tax payments – It is a profitable tax for the Tax Man or Woman! We wonder, how much of that could be mitigated with good quality planning which, of course, we can help you with.
Your Estate will not be subject to Inheritance Tax if it is worth less than £325,000 – this is called ‘The Nil Rate Band’.
If you are widowed or a surviving civil partner then each of these allowances, if unused, may be claimed by your Executors. Remember it is the Executors who must pay any tax that is due to the Inland Revenue.
If you have a larger estate worth more than £2 million, the residence nil-rate band, and therefore the amount you can pass on tax-free, reduces gradually, known as ‘tapering’. For every £2 that your Estate is over £2 million, the new property allowance is reduced by £1. So, if your Estate is worth £2.4million in the 2020-21 tax year, you will lose the entire main residence nil-rate band.
