What is inheritance tax?
So what is inheritance tax, or IHT, as it is more commonly referred to? Do I need to worry about it? If I do is there anything I can do to lessen the impact?
IHT is a levy the government takes on the value of your estate (i.e. possessions and property) when you die, however, it is not all doom and gloom though, because:
1. There is a freebie threshold: This magical number, currently at £325,000, means if your entire estate is worth less, there will be no IHT to pay!
2. Spouses and charities get special treatment: Anything you leave to your spouse or civil partner is generally tax-free, as are gifts to registered charities. So, you can shower your beloved with affection (and diamonds) or donate to a worthy cause without the taxman coming knocking.
3. It's not always 40%: That's the standard rate, but if you leave at least 10% of your estate above the threshold to charity, it drops to 36%. Plus, there are other exemptions and reliefs depending on your situation. Think of it as a tax maze with hidden shortcuts... if you know where to look (hint: consult a solicitor, accountant or independent financial advisor).
4. If you own a property and it is being left to direct descendants you may be entitled to a further freebie allowance of £175,000.
5. If you make a Will you can ensure your allowances are maximised and you can ensure you benefit the people you want to.
Remember: This is just a whistle-stop tour of IHT in the UK. It's always best to get proper advice from a solicitor, especially if your estate is complex or you have valuable assets.
Planning ahead can save your loved ones a tax headache. Consider putting assets in trusts, using gifts strategically, or even getting life insurance to cover potential IHT bills. Think of it as giving the gift of financial peace of mind.
Our Wills, Trusts and Estates team can guide you through the whole process, whatever your circumstances. For more information and advice contact Emma Woollard at Prettys Solicitors 01473 298342 or on firstname.lastname@example.org