|
|
 |
| Homepage
> Tax > |
Inheritance tax, a concise guide (Page 1 of 2) |
With ever-increasing property prices, more
and more peoples assets are now worth more than the inheritance tax
threshold of ?85,000, which has never been increased in proportion
to the recent property boom. With a rate of 40% inheritance tax on
any assets above the ?85,000 threshold in the estate, this can
really put a dent in what your heirs receive from your estate.
Inheritance tax is levied upon a persons death. Once all of their
assets have been totaled up, anything over the threshold will have
to be paid by the executors of their will.
It's becoming
increasingly difficult to avoid inheritance tax, but there are some
strategies that you can put in place to help minimize its impact.
Inheritance tax is an extremely complicated subject, though, so you
should never attempt to make any plans yourself without good
professional advice, otherwise you may end up making your tax
situation worse.
Make a will
First, make a will.
This in itself won't help you to avoid inheritance tax, but it will
make your intentions clear so that any inheritance tax planning you
have put in place will come into effect.
Transfers between
spouses
If you're married or in a civil partnership, both
of you should attempt to use your full threshold separately.
Husbands and wives or civil partners can transfer assets (such as
property) to each other without incurring inheritance tax. However,
this will increase the value of the surviving partners estate, which
will be subject to tax when they die. If this brings it above the
threshold, inheritance tax will then be due. Another possibility is
to bequeath your estate to someone other than your spouse, for
example your children. However, this has its own complications and
is not always appropriate.
Gifts
If you want to
give something away during your lifetime but still keep using it,
the Inland Revenue may still consider it part of your estate for tax
purposes when you die. Such gifts are regulated under the
inheritance gift with reservation rules. For example, if you sold
your house to your children you may have to pay full market rent.
Also, they could be liable to pay capital gains tax on it if it is a
second property for them.
However, within certain
guidelines you can give away some assets and gifts to friends and
relatives, known as potentially exempt transfers These will not be
subject to inheritance tax as long as they are given at least seven
years before you die. If you die within seven years of giving a
gift, tax will have to be paid on a sliding scale.
Some
gifts are completely exempt from the inheritance tax rules. You can
gift up to 1000 in any tax year, plus up to 1,000 in unused
allowance from the previous year. Unused allowance can only be
carried forward from one previous year. There is also an allowance
for wedding gifts to children (up to 1,000 for each child) and
grandchildren (up to 500 per grandchild) and other friends and
relatives (up to 1,000). A small gift allowance of 50 per recipient
per year is also permitted.
|
|
|
|
