About Inheritance Tax
What Is Inheritance Tax? Dead or Alive:
Contrary to popular belief, inheritance tax is not tax payable on death, it is a tax payable when you transfer ownership of assets from one to another.
This means inheritance tax is not only payable when you transfer assets on death, it can also be payable when you transfer or give assets to another person or a trust when you are alive.
Tax paid on death
Inheritance Tax, commonly known as IHT, is a tax charged on the value of an individual's assets, such as property, personal possessions, savings and investments upon their death.
Tax paid when alive
Inheritance tax also applies to certain gifts that a person may have made during their lifetime, called Chargeable Lifetime Transfer.
It can also include any share of assets that the deceased person owned jointly.
Who pays Inheritance Tax? IHT Expert Tax and Estate Planning Advice
Inheritance Tax applies to individuals, meaning that a husband and wife or civil partners must look at their own situations separately. However, concessions were made October 2007 where a deceased partner's unused tax free allowance can be carried over to the partner on death.
If an individual is domiciled, this meaning that the UK is your permanent home or the place where you expect to return to if you moved overseas, Inheritance Tax is charged on all of your assets throughout the world. This will include any overseas assets such as a holiday home.
UK Resident Only or if you live outside the UK but have Assets In UK
Individuals domiciled outside the United Kingdom i.e. not your permanent home, or the place you expect to return to, are subject to Inheritance Tax in respect of assets situated in the United Kingdom only such as a house, whether resident in the United Kingdom or not.
How Does Inheritance Tax Work
Broadly speaking, inheritance tax works on the following basis:
If the amount gifted or transferred is actually above the inheritance tax threshold, inheritance tax is due
Who pays the inheritance tax bill?
Lifetime Chargeable Transfers or Gifts:
When you make gifts (or cumulative gifts in the last 7 years) above the inheritance tax threshold, you become liable to inheritance tax and need to settle the inheritance tax bill yourself.
Death - Inheritance Taxes due on Transfers on Death:
The executors or your estate and/or your beneficiaries will have to settle any bill. If provision has not been made to cover the potential Inheritance Tax bill and it is a large one, it may have to be financed.
This is because the executors of your estate, usually your beneficiaries, cannot normally gain control of the money in your estate until the Inheritance Tax bill has been paid.
This can be done through the bank of the deceased where an executorship account can be opened for executor transactions. There can be tax relief on the interest on a loan for these purposes.
Review Inheritance Tax
If you have already looked at your estate and have made plans. Well done, your beneficiaries should be proud of you.
Keep up to date: The Chancellor keeps changing the rules
Now that you have made plans you must make sure that they are up to date or you could find your beneficiaries ending up with less than you intended.
You need to be aware of any growth that takes place within your estate and make sure that it is covered.
Since planning for Inheritance Tax have you actually looked at the amount the value of your savings, investments, property and possessions have increased by? Contact us so we can help in reducing inheritance tax.