Given the extraordinary state of affairs with COVID-19, many are rightly concerned about inheritance tax and have little understanding of how it could apply to them. With that in mind, Shipleys Tax have a dedicated team provide inheritance tax planning ideas for family business situations and individuals.
Should you need to contact us urgently please email IHT@shipleystax.com and we will endeavour to revert to communications with 48 hours of receipt, we are here to help, guide and assist in these unprecedented times.
What is Inheritance Tax?
Inheritance Tax (IHT) is a tax on the estate of someone who has died, including all property, possessions and money.
How much is Inheritance Tax?
If the value of your estate is above the Nill Rate Band (NRB) of £325,000, then the part of your estate above the threshold might be liable for tax at the rate of 40%.
So, if your estate is worth £525,000 and your IHT threshold is £325,000, the tax charged will be on £200,000 (£525,000 – £325,000). The tax would be £80,000 (40% of £200,000).
The NRB is fixed at £325,000 until 2021, but your NRB might be increased if you’re widowed or a surviving civil partner. Couples can transfer any unused NRB when the first person died to the survivor.
The Residence Nil Rate Band (RNRB) – (also known as the home allowance) has been introduced recently.
The RNRB is on top of the NRB and the TNRB. To be eligible you must pass your home or a share of it to your children or grandchildren. This includes step-children, adopted children, foster children but not nieces, nephews or siblings.
Who pays Inheritance Tax?
If there is a will, it’s usually the executor of the will who arranges to pay the Inheritance Tax (IHT).If there isn’t a will, it’s the administrator of the estate who does this.
IHT can be paid from funds within the estate, or from money raised from the sale of the assets.
However, in practice, most IHT is paid through the Direct Payment Scheme (DPS). This means, if the person who died had money in a bank or building society account, the person dealing with the estate can ask for all or some of the IHT due to be paid directly from the account through the DPS.
Inheritance Tax Planning
IHT is somewhat mischievously known as the “optional tax”. This is due to the fact that there are many reliefs and tax planning opportunities to mitigate the 40% tax on estate.
We have a team of IHT specialists who can help minimise your IHT exposure. Call us on 0114 272 4984 or email IHT@shipleystax.com.