Inheritance Tax
This, as the name might suggest, is a tax on inheritance.
It is payable at a rate of 40% on estates with a value of
£325,000 and over. You may think your estate is too small to be
affected, but note that the total value includes absolutely
everything you own, including your house. Due to rises in property
prices, more and more people are feeling the sting of Inheritance
Tax (IHT).
On a person's death, IHT is charged on the value of that
person's net estate in excess of the nil-rate band (anything over
£325,000), which is all that person's property and assets minus
their liabilities and debts. The IHT is calculated not only on the
value of the property that a deceased person has when he or she
dies, but also on the total of gifts over the last 7 years.
There are, however, ways to combat
Inheritance Tax. For instance, the law allows you to give £3,000's
worth of gifts to loved ones each year, which is a useful way of
making sure the value of your estate falls below the £325,000 mark.
Here are some examples of exempt gifts that are tax free:
-
£3,000 per year;
-
Small presents up to £250 per person
can be given each year as well as the additional £3,000. The same
person cannot receive both £250 and £3,000 in the same year;
-
Gifts to a spouse or civil
partner;
-
Gifts to a person in contemplation
of their marriage, up to £5,000 per parent, £2,500 per grandparent
and £1,000 from anyone else;
-
Normal expenditure out of income
depending on the income and spending habits;
-
Gifts to charities, which are
wholly exempt from IHT;
-
Gifts to political parties,
which are exempt from IHT;
-
Gifts in lifetime or on death to the
nation or for the public benefit e.g. gifts to museums or national
trust property;
-
Gifts in lifetime or on death to
housing associations;
-
Gifts in lifetime for maintenance of
family;
-
transfer of pools and lottery
wins
If you have a query on your personal
circumstances regarding IHT then we advise you to contact us for
some free advice on 0117 910 1209 or email on contact@bristolwillscompany.co.uk