- I have the best Solicitor in the country
- Thank you for all your help and advice. I would recommend you to anyone needing a good solicitor
- Professional and friendly service!
- Always most helpful, knowledgeable and understanding. Very pleasant and efficient
- Thank you very much for all of the work that you have done, delighted with the speed with which matters were concluded
Are you liable for inheritance tax?
- AuthorSarah Begley
It’s a worrying thought that due to the rise in value of property in the UK, more people are finding that they may fall into the inheritance tax bracket. When dealing with the death of a loved one the last thing you would expect is an inheritance tax bill.
What is inheritance tax?
It’s exactly what it says – a tax on the estate (including property, possessions and money) of a deceased person. The inheritance tax is payable by your beneficiaries if your estate exceeds the threshold, and the extent of the threshold depends on whether the person is single or married.
The current threshold for inheritance tax is £325,000 per person. So if a single person dies their beneficiaries will only start to pay inheritance tax on the estate if it is valued over that amount. If you leave your property to your children (and that includes step-children, adopted or foster children too) and grandchildren, then the individual threshold goes up to £450,000, as you become entitled to an additional threshold known as the residence nil rate band.
If you were married or in a civil partnership you can inherit your deceased spouse’s (or partner’s) allowances therefore, you could leave your beneficiaries up to £900,000 tax free (these allowances set to increase annually). This is only if the first person to die leaves everything to the survivor. Anything over this limit is subject to a 40% tax bill. Any ‘unused’ threshold limits can be added to your partner’s threshold.
Property prices on the rise
You may think that inheritance tax is not applicable to you. However, when you consider that the gov.uk government website put the average price of a house in the UK at around £234,794 in January 2017, you can see that many people who do own their own home could be closer than they thought to the limit, especially if they’re in an unmarried partnership and are therefore only entitled to one threshold.
When you add everything up (and remember that everything is taken into account when calculating the value of an estate for probate) then a few ISAs, the family car, some jewellery, life insurances and the cash in the bank could easily make up the remainder of your allowance.
You only pay tax on the amount above the threshold, not the whole sum.
Giving to charity
The amount of inheritance tax your beneficiaries pay can be reduced to 36% on some assets if you bequeath at least 10% of the net value of your estate to charity.
There are other ways to reduce the amount of tax paid through ‘taper relief’ for property given as a gift while a person is still alive , or with Business relief, which lets some assets be passed on without inheritance tax being charged.
What about the future?
The state of the property market is in flux, and for the first time in years, average prices actually went down at the start of 2018. However, high-end properties (particularly desirable residences in the south of England, London, and other key locations such as Cumbria, Manchester, the West Country, and the Midlands) could still see a more buoyant market rate in the next 12 months. It’s very difficult to predict exactly how high property prices will go, and whether or not the cut-off point for inheritance tax will keep pace with the changing market.
If you’re currently sorting out your will and want to make sure your family isn’t hit hard with an inheritance tax bill after your death then it is well worth seeking the advice of a property and probate law expert. They will be able to look at your assets and tell you how to make sure your beneficiaries are not left out of pocket.
At Martin Tolhurst Solicitors we have team of lawyers that specialise in the preparation of wills, tax planning and estate administration. We can work with you to help you prepare your will or advise you on how to administer an estate. Get in touch today to discuss more on 01474 546 013 or email our new enquires team at email@example.com.
Please note that this article does not constitute individual advice and is for guidance only.