So what is Inheritance Tax?
This is a general indication only and you must contact us or your accountant for more specific advice , but in general terms it is a tax paid by your estate from the property that you leave when you die.
How much is it?
It is often a complicated calculation but very simply and ignoring any discretionary trusts made during life it is calculated as follows:
Value of your property at your death to include any property in which you had a life interest i.e. you did not own it outright but had a legal and enforceable right to use it or occupy it or to take the rent from it
PLUS
Value at the date of the gift of most gifts made in the last 7 years before you died. Special rules apply if the gift was made over 3 years before your death.
Less
- Gifts made to your spouse or civil partner either during life or in the will – this is called the Spouse Exemption.
- Annual exemption of £3000 for lifetime gifts in the last 7 years from the value of those gifts , this can be carried forward for one year only if no gifts were made in that year.
- Marriage Gift Exemption £10,000
- Gifts that are considered appropriate in line with your income for most this will not add to the annual exemption
- Nil Rate Band – This is a figure fixed by law annually in the budget which is deducted from the value of your whole estate including the gifts in 7 years, currently this is £325,000.
- Unused Spouse nil rate band from any deceased spouse
Tax is then payable on the balance at 40%
How can I tax plan?
You can often make gifts and transfers during your life and you can always make provisions in your will to do this.
What can we do if someone has died, is it too late to make inheritance tax savings?
No, it is not. You can if all the beneficiairies agree and they all over 18 and mentally capable agree that the will should be rewritten following death to be more tax efficient. This is done by a Deed of Variation.
What can a Deed of Variation do?
It can:
- rewrite a will and give gifts to new beneficiaries
- take gifts from beneficiaries if they agree and redistribute those gifts to existing or new beneficiaries.
- Vary the intestacy rules application
- sever a joint tenancy
