Inheritance Tax – A Voluntary Levy
Referred to commonly as IHT, this form of taxation covers the estate of someone who has passed away, including all properties, possessions and money. And despite only a handful estates being large enough for this to be applicable, it is still something of importance that can be easily overlooked. This month’s blog at Clifton-Crick Sharp & Co offers a guide to inheritance tax. For further details, call us in Worcester on .
When it Must be Paid
Applicable IHT must be paid by the end of the sixth month immediately following the deceased’s passing, failure to pay within this period will lead to the charging of interest. Therefore, it is advisable to pay at least some of the IHT within that six-month period even prior to grant of probate. This is known as “payment on account” – HMRC will refund any overpayment that occurs.
Tax Reduction
Although difficult, it is possible to reduce your IHT rates and the following points will provide some insight on how to achieve this:
Leave a legacy to charity Making potentially exempt transfers Investing in business assets Leaving assets to your heirs by putting them into a trust Leave your estate to your spouse Pay into a pension rather than a savings account
How Much is IHT?
The amount of money taxable depends solely on the total value of the deceased’s estate, which includes money in the bank and total value of all property from building to vehicles. There is no tax to pay if your estate is either valued below £325,000 or anything over the £325,000 mark is left to your spouse or a charity. Married couples and civil partners can transfer any unused element of their IHT nil-rate band to their living partner when they die. This means a couple has a joint nil-rate band of £650,000.
In April 2017, an additional inheritance tax allowance was introduced called the ‘residence nil-rate band’. To qualify for this allowance, you must pass on your main residence, or the sale proceeds of your former residence, to your children (including adopted, foster or stepchildren) or grandchildren when you die.
The Threat of IHT
The recent and high increase in property value sees more and more people falling into the category of IHT payee, and it takes foresight to fully realise how this may affect you in the future, and how you can minimise the amount taxed.
Contact Us
For further information about inheritance tax, don’t hesitate to contact Clifton-Crick Sharp & Co. Call us on . Alternatively, you can make an enquiry through our contact form .
