Inheritance Tax is payable if the deceased’s estate exceeds £325,000 (the Inheritance Tax Threshold). For married couples and Civil Partners, there is the opportunity to transfer unused Threshold from the first death. Please see https://www.gov.uk/inheritance-tax/leaving-assets-spouse-civil-partner.
Tax is charged at 40% of the value over the Inheritance Tax Threshold (or 36% if 10% or more of the estate is left to charity). Please see https://www.gov.uk/inheritance-tax/giving-to-charity-to-reduce-an-inheritance-tax-bill.
Recently the Government announced that the Inheritance Tax Threshold would be increased, but only in respect of a persons main home. This additional amount is known as the “Main Residence Nil Rate Band” and will be phased in as follows:
- £100,000 in 2017 to 2018
- £125,000 in 2018 to 2019
- £150,000 in 2019 to 2020
- £175,000 in 2020 to 2021
For further information: https://www.gov.uk/government/publications/inheritance-tax-on-main-residence-nil-rate-band-and-downsizing-proposals-technical-note/inheritance-tax-on-main-residence-nil-rate-band-and-downsizing-proposals-technical-note
In addition to the Inheritance Tax Threshold and the Main Residence Nil Rate Band available on death, there are provisions in Tax Law which allow for some lifetime planning:
- Each person may gift £3,000 each year with no Inheritance Tax consequences.
- You may also gift any amount, and provided you live for 7 years following that gift, the gift will not be considered part of your estate on death (Potentially Exempt Transfer). Please see https://www.gov.uk/inheritance-tax/gifts
- Any gift to a charity or a spouse or civil partner is exempt for Inheritance Tax.
Gifts to Trusts can reduce the overall estate on death, the law concerning trusts and taxation are complicated, but for an overview please see https://www.gov.uk/guidance/trusts-and-inheritance-tax
We are concerned to ensure that we understand your motives for any tax driven gifts/transfers. We are not authorised to give financial advice and recommend that you consult with an independent financial adviser on such issues. However, we are happy to meet with you and your financial adviser together either at home or in the office to discuss your estate planning options.