How does inheritance tax work?
Inheritance tax (IHT) is a tax on the estate (the property, money and possessions) of a person who has died. How much tax is paid depends on the value of the estate, minus any debts. Typically, that would include the value of their home(s) (less any outstanding mortgage) along with its contents; cars; jewellery; business; money in bank accounts; pensions; investments; shares and life insurance. Inheritance tax is paid on the value of an estate above the nil-rate band, £325,000. We live in a time when rising property prices have created a generation with greater wealth at its disposal. While this is good news for these people - and the families they want to pass it on to - the bad news for their relations is that they might be left with something extra they hadn't anticipated: a hefty IHT bill.No one embraces the prospect of giving away 40% of their estate to the government when they die. Effective IHT planning can save families significant amounts of money, enabling older generations to pass on more of their wealth to their children, grandchildren and other beneficiaries - and less to the taxman. Our experienced accountants are here to guide you through the complexities.
What are the basic inheritance tax reliefs that can be claimed?
- The first £325,000 of an estate is tax-free, subject to lifetime gifts.
- Assets can be left to a surviving spouse tax-free and,
- Any unused nil-rate band can be used on second death.
- Residence nil-rate band of £175,000 per person.
- Business property relief.
- Agricultural property relief.
- Annual allowances.
- Gifts out of normal income.
- Gifts to charity.
- Gifts on marriage and small gifts.
How BSR Bespoke accountants in Tunbridge Wells can help with IHT planning
Our expert knowledge of the current inheritance tax regime enables us to provide a discreet and comprehensive estate-planning service which includes advice on:
- planning and regularly reviewing a will.
- how to pass on your home.
- making the most of exemptions and reliefs.
- optimising lifetime transfers.
- transferring assets into a trust or a Family Investment Company.
- making tax-efficient gifts to charity.
- making tax-efficient gifts to friends and family, including annual exemptions, the small gift allowance and gifts for weddings and civil partnerships.
- giving gifts with reservation of benefit.
- keeping records.
- the seven-year rule.