Act now to protect your loved ones later

Being aware of your Inheritance Tax (IHT) position can potentially save your loved ones thousands of pounds.

What is IHT payable on?

All of your assets (including ISAs but generally excluding pensions) are valued at the date of death to calculate your total estate value. Any available exemptions and nil rate bands are then deducted. The balance is subject to IHT at 40% (or 36% if the reduced rate applies where part of your estate is left to charity). 

My estate is worth less than £1 million, which I heard is the threshold, so I don’t need to worry about IHT?

This is a common misconception. There is a maximum tax-free allowance of £1 million, but it is not available to everyone.

The rules are complex, but broadly everyone is entitled to a nil rate band of £325,000. Not everyone is entitled to the residence nil rate band (RNRB) of £175,000. Total maximum allowances available will depend on your marital status and whether you have children, as follows:

•          £325,000 - Unmarried with no children

•          £500,000 – Unmarried with children

•          £650,000 – Married couple with no children

•          £1,000,000 – Married couple with children

The RNRB has a number of conditions for  qualification, so its availability will depend when  you die, who inherits your estate, how much your total estate is worth, whether you own or owned a home and how much it is worth.    

Are there any other exemptions?

Gifts to your spouse, civil partner or a charity on  your death are exempt from IHT. There are also other exemptions, eg for business and agricultural property. 

What is the most common piece of IHT planning advice you give?

To marry your partner so IHT isn’t payable twice on the same assets – once on your death, then again on theirs.

Please talk to Gemma Hedges,  Associate Director at HWB, (pictured above) about your IHT requirements.

023 8046 1259

gemma.hedges@hwb-accountants.com