Inheritance Tax is usually paid on an estate when somebody dies. It’s also sometimes payable on trusts or gifts made during someone’s lifetime. You don’t have to pay Inheritance Tax if your estate valued at less than the threshold (£325,000 in 2013-14). The tax is payable at 40 per cent on the amount over this threshold or 36 per cent if the estate qualifies for a reduced rate as a result of a charitable donation. There are various tax planning tips available with regards to this heading if you act on correct time i.e. even value of the estate is above the threshold, you could apply for Inheritance Tax exemptions and Reliefs in some circumstances. Some examples listed below.
- Spouse or civil partner exemption
Your estate usually doesn’t owe Inheritance Tax on anything you leave to a spouse or civil partner who has their permanent home in the UK – nor on gifts you make to them in your lifetime – even if the amount is over the threshold.
- Charity exemption
Any gifts you make to a ‘qualifying’ charity – during your lifetime or in your will – will be exempt from Inheritance Tax. A donation to charity in your will may also reduce the rate that tax is paid at (see more in the link below).
- Potentially exempt transfers
If you survive for seven years after making a gift to someone, the gift is generally exempt from Inheritance Tax, no matter what the value.
- Annual exemption
You can give up to £3,000 away each year, either as a single gift or as several gifts adding up to that amount – you can also use your unused allowance from the previous year but you use the current year’s allowance first.
- Small gift exemption
You can make small gifts of up to £250 to as many individuals as you like tax-free.
- Wedding and civil partnership gifts
Gifts to someone getting married or registering a civil partnership are exempt up to a certain amount.
- Business, Woodland, Heritage and Farm Relief.
If the deceased owned a business, farm, woodland or National Heritage property, some relief from Inheritance Tax may be available. Please contact us if you need further advice, free one to one consultation available until we commence the process.