Inheritance tax is payable if the estate of a deceased person (their property, money and possessions) is worth more than a figure which is set periodically by the Government. Currently standing at £325,000. This figure is referred to as the “nil rate band”. Estates exceeds this figure, will be subject to tax at 40%, though this will be reduced to 36% if more than 10% of the estate is left to charity. This is explained below, under Exemptions for Tax.
Residential nil-rate band.
In order to reduce the impact of inheritance tax (IHT) on property owners. The Government has announced that from 2017 a new “residential nil-rate band” will be available, in addition to the £325,000 nil rate band, to those who leave a property that has been their home to their children or grandchildren. The allowance will start at £100,000 for deaths in 2017/18 and grow to a maximum of £175,000 in 2020/21. The value of the allowance will reduce by £1 for every £2 by which the value of an estate exceeds £2 million, so that it will cease to be available in respect of estate worth 2.35 million or more.
People who are domiciled in the United Kingdom are liable to inheritance tax (IHT) on all their property, whether in the United Kingdom or overseas.
As well as being payable on the state of deceased people, inheritance tax may be payable on lifetime transfers, whether to individuals or into trusts.
Caroline Anstee from Anstee & Co said
“It is usually the executor or executors of the deceased person’s Will who pay inheritance tax, using funds from the estate. If the deceased left no Will, the person responsible will be the administrator of their estate. In the case of trusts, it is the trustees who are responsible for paying inheritance tax”.
What about the beneficiaries?
Beneficiaries of an estate do not usually have to pay inheritance tax, but in the case of a lifetime gift, the state or person receiving the gift may be liable for this tax if the person who made the gift dies within seven years of doing so.
Anstee & Co can help with all aspects for inheritance tax planning. For additional information and help please contact us.
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