Inheritance tax is paid on money, property and assets (known as the “estate”) that is left by an individual when they die. It may also have to be paid on gifts that are made during that person’s lifetime. You do not usually have to pay tax on other chattels you may receive from a deceased person’s estate.
Changes To Inheritance Tax – Inheritance tax basics
When a person dies, inheritance tax is payable if that person’s estate, consisting of money, property and possessions, is deemed to be valued at more than the nil-rate band.
Since 2009 the nil-rate band has been set at £325 000, with anything above this being taxed at a rate of 40%.
If, when you died, your estate was worth £500,000, the first £325,000 would be free from inheritance tax, but the remaining £175 000 would be liable for IHT tax at 40%.
IHT can be reduced slightly to 36% on some of the assets, if the owner has left 10% or more to charity.
Any unused allowance could be transferred to a spouse or civil partner thus increasing the nil-rate band to £650,000 if the deceased did not use any of their own allowances (although this is very rare).
Read more in this article about ways to reduce your IHT liability.
When it comes to capital gains tax planning, here is our guide to tax efficiency when selling business assets for profit.
While capital gains tax (CGT) is paid by relatively few people, around 211,000 in 2013/14 according to HMRC, it can represent a significant cost for those affected.
The current tax-free allowance is £11,100, and everything above this will be taxed at either 10% or 20% depending on whether you’re a basic or higher/additional rate taxpayer. So capital gains tax planning is essential NOW for a brighter future. Warrington IFA Can Help
In this month’s money management, we look at:
- Landlords and how buy-to-let investors rushed to complete before the April 2016 stamp duty changes took effect.
- How the national living wage has now become a legal requirement for employers.
- A number of changes to capital gains tax and entrepreneurs’ relief have been introduced for 2016/17.
- We also look at the attitudes of senior managers can often be an obstacle to the introduction of flexible working.
- Stamp duty changes lead to buy-to-let surge.
- Changes to stamp duty introduced in April 2016 have been linked to changes in the buy-to-let market.