Inheritance Tax Advice

Inheritance Tax Calculator

This Inheritance Tax Calculator will help you work out any potential IHT payments. Please contact us if you would like to speak to someone in person about IHT.

Inheritance Tax

Depressingly, the two certainties in life sometimes come knocking together and this is when your beneficiaries (other than your spouse) are stung for Inheritance Tax (IHT). The threshold at which this tax is payable changes year-on-year but it currently kicks in at £312000 (08/09) and is set at a hefty 40%.

Will your children (beneficiaries) have to pay a 40% tax bill on their inheritance?
With careful early planning there are painless ways to avoid having to pay such an unnecessary tax.
The current nil rate band is £312000 (08/09) for an individual but spouses or civil partners may benefit from transferable nil rate band rules increasing this to £624000, the transferable allowance does not apply to unmarried couples.

What is included in IHT?

A persons estate encompasses: everything owned in their name; the share of anything owned jointly; gifts from which they retain some benefit; assets held in trusts from which they receive income.

Anything owed by the deceased person is offset against this, such as mortgages, loans, bills and funeral expenses.

How to avoid IHT

If any amount of money is given as a ‘gift’, tax is not counted on this amount if the giver survives for 7 years after the gift is given. These ‘gifts’ are called potentially exempt transfers (PETs). Money put into certain types of trust is counted in this category.

Business and agricultural relief should also be considered. For example, interest held for more than 2 years on a business or a farm, or on farmland let for more than 7 years could qualify for relief.

Gifts that are Exempt

Some gifts are even exempt from the seven-year rule, including: wedding gifts of up to £5,000 to each of your children; wedding gifts of £2,500 to each grandchild, and wedding gifts of £1,000 to anyone else; other gifts of up to £3,000 a year (plus any unused balance of £3,000 from the previous tax year; gifts of up to £250 each to any number of people each year; gifts to certain charities.

Gifts given regularly from income after tax are exempt, provided the giver retains enough money to maintain their own standard of living.

Gifts between husbands and wives are exempt whether they are made while both is still living, and left to the surviving husband or wife after the death of the other. Tax is due eventually when the surviving husband or wife dies (if estate value is greater than the IHT threshold).

When IHT must be paid

Inheritance Tax should usually be paid within 6 months from the end of the month of death. Tax on certain assets, for example land and buildings, may be paid in instalments over 10 years. If the asset is sold during this period, the remaining balance must be paid immediately.

Inheritance Tax Calculator

This Inheritance Tax Calculator will help you work out any potential IHT payments. Please contact us if you would like to speak to someone in person about IHT.
The rules regarding Inheritance Tax are complex and always subject to change we can provide you with up to the minute advice on ways to plan for your beneficiaries.