An inheritance tax ( IHT ) charge only applies if the value of the estate is above the IHT threshold-which is currently £325,000. This is often referred to as the “nil rate band”. You will not pay any IHT if you leave everything to your spouse or civil partner, a charity or sports club. These are just some examples of exemptions.
If you’re married or in a civil partnership and your estate is worth less than £325,000, the unused percentage can be added to your partner’s threshold on their death. This means the threshold can be as much as £650,000.
IHT and the next generation.
When the inheritors are the children rather than the spouse, on the death of both parents a potential IHT charge may apply. The inheritors will pay IHT of 40% of anything over the threshold. However, as we previously established in relation to unused threshold, the potential maximum nil rate band available to offset against their combined assets will be £650,000.
Gifts and IHT
You can give away £3,000 worth of gifts each tax year without them being added to value of your estate. This is known as your “annual exemption”. You can carry any unused annual exemptions forward to the next year – but only for one year. You can also give as many gifts of up to £250 per person as you want during the tax year so long as you haven’t used another exemption on the same person.
IHT changes from the next tax year.
From 6 April 2017, you’ll get a larger IHT threshold if you give your home to your children or grandchildren. A new residence allowance (the residence is set to increase by £25,000 each year, from £100,000 in April 2017 to £175,000 per person by 2020/21. This is in addition to the main nil-rate band.
To find out more about inheritance tax planning, why not arrange a free initial meeting with one of our independent financial advisers.
How Anstee & Co can help you with IHT
If you would like to know more about inheritance tax planning then why not arrange a meeting with one of our expert financial adviser. They take meetings at our Kettering, Stamford and London offices. Home and office meetings can also be arranged. We cover Lincolnshire, Northamptonshire, Warwickshire and Bedfordshire. Our expert financial adviser also make use of meeting rooms in Bedford, Towcester, Wellingborough and Warwick.
Why not contact us today to see how we can help you.