Torr Waterfield discuss Inheritance Tax.
For most people, Inheritance Tax is a tax they only encounter when dealing with the estate of someone who has passed away.
There’s normally no Inheritance Tax to pay if either:
The value of your estate is below the £325,000 threshold
You leave everything to your spouse or civil partner, a charity or a community amateur sports club.
If you give away your home to your children or grandchildren, your threshold will increase to £425,000.
If you are married or in a civil partnership and your estate is worth less than your threshold, any unused threshold can be added to your partner’s threshold when you pass away. This means their threshold can be as much as £850,000.
Inheritance Tax rates
The standard Inheritance Tax rate is 40%. It’s only charged on the part of your estate that’s above the threshold.
Inheritance Tax can be paid at a reduced rate of 36
% on some assets if you leave 10% or more of the ‘net value’ to charity in your will.
If your estate is worth £600,000 and your tax-free threshold is £325,000 - The Inheritance Tax charged will be 40% of £275,000 (£600,000 minus £325,000).
Who pays the tax to HMRC?
The Funds from your estate are usually used to pay the Inheritance Tax to HM Revenue and Customs. This is done by the person dealing with the estate (the ‘Executor’, if there is a will).