What you need to know about Inheritance Tax
- Wills, Trusts & Probate
- 21st Dec 2023
In the United Kingdom, Inheritance Tax (IHT) is a significant aspect of estate planning and financial management. Understanding the intricacies of IHT is crucial for individuals to ensure that their loved ones can inherit their assets without facing hefty tax burdens. Thresholds and Rates Each individual is entitled to a nil-rate band of £325,000.00, before […]
By Sophie LennonMLP Law
In the United Kingdom, Inheritance Tax (IHT) is a significant aspect of estate planning and financial management. Understanding the intricacies of IHT is crucial for individuals to ensure that their loved ones can inherit their assets without facing hefty tax burdens.
Thresholds and Rates
Each individual is entitled to a nil-rate band of £325,000.00, before their estate is subject to Inheritance Tax.
The current rate for Inheritance Tax is 40%.
Residence Nil-Rate Band
Individuals who pass on a residence to their direct descendants can claim a further allowance of £175,000.00 Residence Nil-Rate Band.
There is no Inheritance Tax payable upon the first death of a married couple whereby the estate passes to the surviving spouse.
The estate is able to claim any unused Nil-Rate Band or Residence Nil-Rate Band of the spouse who died first and transfer this to the estate of the spouse on second death.
If you leave up to 10% of your estate to charity, you can claim a reduction in the Inheritance Tax rate paid and pay a rate of 36% Inheritance Tax.
Gifts made during your lifetime may impact the Inheritance Tax payable by your estate. For a gift to be exempt from Inheritance Tax, you must survive for 7 years following the gift.
You do have an annual allowance of £3,000.00 for making gifts, and if unused, can carry over the previous years allowance to bring the total to £6,000.00.
Business Interests and Agricultural Property Relief
Business interests and agricultural property may be 100% or 50% exempt from Inheritance Tax.
We highly recommend you obtain professional legal advice to discuss your assets, and whether your estate will be subject to Inheritance Tax. Your legal advisor will then be able to advise you on the exemptions and reliefs available to you, and recommend steps you can take to minimise Inheritance Tax and protect your assets for your loved ones.
About the expert
Stephen is the Owner of MLP Law and leads our Commercial, IP and Dispute Resolution teams which provide advice on all aspects of the law relating to mergers, acquisitions, financing, re-structuring, complex commercial contracts, standard trading terms, share options, shareholder and partnership agreements, commercial dispute resolution, joint venture and partnering arrangements, IT and Technology law, Intellectual Property, EU and competition law, Brexit and GDPR.
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