Inheritance Tax Planning
Protecting your loved ones
It’s likely that over the course of your life you will have built up money and assets that you will want to leave to your loved ones. It’s important to remember that when you die, your estate could be subjected to Inheritance Tax if it’s worth more than the ‘tax threshold’. Your estate consists of all the assets you own including property and shares,
here’s normally no Inheritance Tax to pay if 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’re married or in a civil partnership and your estate is worth less than £325,000, you can transfer any unused threshold to your partner when you die. This means their threshold can be as much as £650,000.
You can also benefit from the residence nil-rate band (RNRB) if you leave your residential property to direct descendants. The tax-free allowance, currently £125,000 will rise to £175,000 in 2020-21. A couple will be able to use two allowances along with their existing nil-rate band of £325,000 allowance. This means they will eventually be able to pass a £1m property to their children without attracting Inheritance Tax. Direct descendants include children, grandchildren, step-children, adopted and fostered children and their spouses or civil partners.
Inheritance Tax is charged on your estate at 40%.
Last Will and testament document
Fortunately, if your estate is likely to be over the threshold, with some help and some careful tax planning there are ways to minimise inheritance tax and make sure your loved ones get the maximum benefit of your estate.
The important word here is ‘planning’, as there are rules that can take several years to take effect and leave you in the best position with regards to the tax due on the assets you leave behind.
Speaking to an independent financial adviser will help you to find out more about how to minimise the inheritance tax on your estate.
The Financial Conduct Authority does not regulate Taxation advice and Will Writing.