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Inheritance Tax (IHT)

What is Inheritance Tax?

Inheritance Tax (IHT) is a tax on an individual’s estate, which can include properties, shares, investments, savings and all assets, which has to be paid upon the death of the individual.

You may be exempt from Inheritance Tax if:

  • the value of your estate is under the £325,000 threshold
  • Or you leave everything over £325,000 to your spouse, civil partner, a charity or a community amateur sports club.

Tax Advisory UK recommends speaking with a Chartered Tax Advisor (CTA) about strategies that can be used to reduce your Inheritance Tax liabilities.

Tax Advisory UK has a simple goal, to provide all our clients with affordable tax-saving solutions by engaging you with highly regarded Chartered Tax Advisors (CTA) and respected Tax Investigators.

How much is Inheritance Tax?

If the above does not apply to you then there could be a 40% tax on anything that is over the £325,000 inheritance tax threshold.  You can have this dropped to 36% if you have gifted at least 10% to a charity in your Will.

For example, if your combined estate of properties, investments and shares total £1 million, you can subtract the £325,000 IHT threshold leaving £675,000 which can be taxed at 40%.  The tax needing to be paid would be £270,000, leaving your family with £405,000 and the £325,000 exemption rate.  The total of your estate that your family would inherit upon your passing would be £730,000.

If you are married or in a civil partnership, the Inheritance Tax threshold is £650,000.  If you die then your spouse or civil partner will inherit your estate which will be IHT exempt.

 

Leaving your home to your children

If you decide to leave your home to your children or grandchildren, you could also be exempt from a further £175,000 IHT tax due to the Residence Nil Rate Band (RNRB).  So, if your estate is under £2 million, you can save £500,000 on IHT by combining the £375,000 IHT exemption and the £175,000 RNRB.

If you are married then this could rise to £1 million tax-free.  If you and your spouse has assets of £1 million and you die and leave everything to your spouse then the £325,000 IHT exemption and the £175,000 RNRB is passed over and they are also entitled to their own £325,000 IHT exemption and £175,000 RNRB, totalling £1 million tax-free.

 

What is the 7-year rule on Inheritance Tax?

If you gift over £325,000 in the 7 years before your death to family or friends, and you die within those 7 years, the receiver of the gift may have to pay the 40% Inheritance Tax.

HMRC use a ‘taper relief’ if you make gifts 3 to 7 years before your death.

Years between gift and death Tax paid
less than 3 40%
3 to 4 32%
4 to 5 24%
5 to 6 16%
6 to 7 8%
7 or more 0%

 

Gifts are not counted towards the value of your estate after 7 years.

Contact Tax Advisory UK and we will arrange a meeting with some of the UK’s best Chartered Tax Advisors who will help reduce your Inheritance Tax liabilities.  Please call 07908 074954.

“We contacted Tax Advisory UK when we were uncertain what would happen to our estate upon our passing and if our children and grandchildren would be charged the 40% Inheritance Tax.

Tax Advisory UK arranged 4 meetings with Chartered Tax Advisor firms and we chose a team that we felt comfortable with and we were confident to engage with.

The Chartered Tax Advisor completed our Inheritance Tax plan and not only have we saved £1.2 million but we have peace of mind that our family will see the full benefits of our labour.

Tax Advisory UK showed real quality and authority in their industry and has built a lot of trust with us in helping with our IHT planning.

They will be highly recommended to our network, by us, for all future projects”

NM and KF

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