At Amphlett Lissimore, our private client lawyers can assist you with inheritance and tax planning. This allows you to plan ahead and ensure that your loved ones are cared for.
What is Inheritance Tax?
Inheritance tax is a tax on your estate when you die. Your ‘estate’ means everything that belongs to you, including your home, personal belongings, savings, investments, and so on. If your estate is taxable, the tax must be paid before anyone can inherit. You can learn more about how it works and who it affects in our Inheritance Tax guide.
Learn more: Inheritance Tax: what it is, and why most of us won’t have to pay it
Please contact our private client team on 020 8771 5254 – We are always happy to help.
The basics: Inheritance Tax Rules
- The first £325,000 of your estate is called the ‘nil-rate band’. With few exceptions, there’s no inheritance tax to pay on the nil-rate band when you die.
- There’s no inheritance tax on anything you leave to your husband, wife, or civil partner.
- If your husband, wife, or civil partner has already died, there may be a second tax-free allowance of up to £325,000, unless his or her nil-rate band was used up in non-exempt gifts.
- If you leave your primary residence to your children or grandchildren, the nil-rate band is increased to £500,000 (This only applies to estates worth under two million pounds).
- There’s no inheritance tax on anything you leave to a charity. Gifts to them are exempt from inheritance tax, and so is up to £100,000 left to a political party.
- Except on exempt gifts and the nil-rate band, the rate of tax is 40 per cent.
- For tax purposes, your estate includes your share of any asset you own jointly with someone else, even if it passes automatically to the other person.
Trusts and Gifts in Your Lifetime
- Any money or property you gave away during the last seven years before you died may be counted as part of your estate to calculate the tax.
- Anything you gave away more than seven years before you died may also be added back to your estate if you continued to benefit from it.
- Read our blog on Gifts and Inheritance Tax for more information on the seven-year rule.
- If you had a life interest in trust property (and you will know what that expression means if you have one) there will be tax on the capital value of the trust property when you die. Your estate will be added to the trust property to calculate the total tax, which is then normally paid from your estate and the trust fund in proportion. This may mean that your estate is taxed even if it is less than the nil-rate band.
Inheritance and Tax Planning
There is scope for saving inheritance tax by making use of the exemptions for some kinds of gifts in your lifetime. We can advise you on this when drawing up your will. As part of our will-writing service, we will review your estate and explain how much tax you may have to pay. We will outline all the exemptions available and ensure that you understand all the rules.
Tax can sometimes be reduced even after someone has died. An agreement between the people inheriting the estate can, in effect, rewrite the will, but we do not advise you to rely on this possibility when making your will. It cannot always be done, and the law that allows it may change without warning. You can find out more in our guide to gifting your home to your children to avoid Inheritance Tax.
