Inheritance Tax

Inheritance tax is a tax paid on your estate when you die.

The tax that you have to pay could have a huge impact on your estate and how much you leave to your loved ones.

If the net value of your assets is greater than your Inheritance Tax threshold there could be tax to pay, subject to some exceptions. The rate of Inheritance Tax upon death is currently 40%.

Inheritance Tax Thresholds
Each person has a Nil Rate Band (Inheritance Tax threshold) of £325,000, upon death.

Couples in a marriage or civil partnership can leave gifts to each other without incurring an Inheritance Tax liability due to the spouse/civil partner exemption.

Any unused Nil Rate Band from a deceased spouse or civil partner’s estate can be transferred to the survivor’s estate. This gives up to £650,000 free of Inheritance Tax for married couples or civil partners who leave a gift to each other on the first death.

There is a further Residence Nil Rate Band of £175,000 which is available to individuals who own their own home or a share of it, which is inherited by a direct descendant. Any unused Residence Nil Rate Band from a deceased spouse or civil partner’s estate can also be transferred to the survivor’s estate.

The combined Nil Rate Bands above allow married couples and civil partners to claim up to £1 million free of Inheritance Tax.

Inheritance Tax Planning
It is possible to minimise and mitigate the payment of Inheritance Tax on your death. We can advise you on:

• The potential exposure to Inheritance Tax;
• Structuring your Will to minimise the amount of tax payable. This could include the use of Will Trusts;
• Making lifetime gifts;
• Investing in assets that are exempt from Inheritance Tax;
• Reliefs for Business and Agricultural Property which can offer up to 100% relief from Inheritance Tax;
• Structuring your Will to make use of the reduced rate of Inheritance Tax of 36% if you gift to charity.

One of our specialist lawyers can talk you through the above and help you reduce the Inheritance Tax liability when you die.