Inheritance tax is a tax on the estate of someone who has passed away. The tax is paid on the net value of the estate above a certain threshold. This is known as the inheritance tax threshold or nil-rate band.
Personal exemption: Everyone in the UK has a personal threshold of £325,000, also known as the nil-rate band. This means that any individual net estate with value of less than £325,000 will not pay inheritance tax. If a net estate is valued over £325,000, then the excess will be subject to the 40% tax rate.
Residence nil-rate band: As of the 2017-18 tax year, there is an additional tax allowance available for properties left to direct descendants such as children or grandchildren. Currently, the allowance stands at £175,000, bringing the total tax-free limit up to £500,000 (included the £325,000 nil rate band detailed above) for an estate with residential property values.
It is important to consider inheritance tax planning, and working with an experienced estate planning practitioner can help ensure that the your wishes are carried out and any applicable tax mitigation is considered (planning ahead can help to mitigate any potential taxes owed).
For avoidance of doubt, tax mitigation is a method of safeguarding your tax position, thus reducing your tax liabilities.
Recent Comments