No one wants to spend their time with their loved ones discussing finances and inheritance taxes, but it is important to have your finances in order and for everyone to have a degree of understanding when it comes to inheritance tax so as not to cause upset and confusion when the time comes. Here, we have put together an overview of inheritance tax.
What is Inheritance Tax?
Inheritance tax is a tax imposed on a deceased’s estate. All of their assets, including property, personal belongings, and cash, make up the estate. The estate executor is responsible for paying inheritance tax, which is often due when the estate’s worth is above a specific threshold.
The value of the estate and the intended beneficiaries determine the inheritance tax rate. For instance, inheritance tax is not due if the estate belongs to a spouse or civil partner and is worth more than £325,000. However, inheritance tax at the rate of 40% will be due if the estate is worth more than £325,000 and is given to a person who is not a spouse or civil partner.
If inheritance tax is due on your inherited estate, you have six months from the date of death to file a return with HM Revenue & Customs (HMRC) and make the necessary payment.
When Might Inheritance Tax Not Be Due?
There are certain situations where inheritance tax may not be due. For instance, no inheritance tax would be owed if the deceased had bequeathed their whole assets to charity. Furthermore, certain reliefs can lower or altogether remove the need to pay inheritance taxes. For instance, agricultural relief is a type of assistance offered to agricultural property owners.
Can You Reduce How Much Inheritance Will Be Due?
You can reduce your inheritance tax rate by making charitable contributions. The government promotes this by granting charitable donations an inheritance tax rate reduction. The inheritance tax rate on the remaining portion of your estate is lowered from 40% to 36% if you donate at least 10% of it to charity. You may save a sizable sum on taxes by doing this. Inheritance tax exemptions also apply to charitable gifts. This means that no inheritance tax will be paid on any money or property you give to charity.
Further methods to reduce inheritance taxes include:
- Gifts
- Trusts
- Wills
- Charity
- Insurance
Contact Probate Forms for probate advice on 0209 9859553.
