Five things you need to know about inheritance tax

Inheritance tax is something many of us don’t know enough about. Simply because we don’t think we need to.

But with inheritance tax revenue at record levels, it could be important to understand the basics. By doing so, you can discover whether your family could be affected in the future – and start taking the steps to address it. Our video helps to explain some of the basics of inheritance tax planning including thresholds, what could be included in your estate and how you could potentially reduce your liability.

Inheritance Tax Explained

Below are five key areas to consider to help you decide if it's worth finding out more about Inheritance Tax.

Five key points to consider

1) It doesn’t just affect the wealthy

Traditionally only the richest in society were affected by inheritance tax. But soaring property prices means more and more people are now facing it.

It all comes down to the value of your overall estate upon your death. If it’s worth more than your personal nil rate band, anything above could be liable to inheritance tax at up to 40%. (If you’re single or divorced, the nil rate band is £325,000 and if you’re married or widowed, it’s up to £650,000.)

2) There's also the residence nil rate band - but not everyone can benefit

If you’re wondering what the residence nil rate band is, this can be used alongside your usual nil rate band – and was introduced to help more people reduce their inheritance tax liability. Every UK adult has a residence nil rate band of £175,000.

But the rules can be more complex than many people realise. Amongst the restrictions, you can only use this allowance if it relates to a property you have lived in, and passed to a direct descendant (such as your child or grandchild - not a friend, niece or nephew).

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3) Your estate isn’t just your home

Your savings and investments, car and any rental properties form a part of your estate. Not forgetting any jewellery you have, household furniture, or expensive paintings (minus any liabilities, like an unpaid mortgage).

After working out the value of your belongings, you may be surprised by how much your estate comes to. It could be worth a lot more than you think. It’s also important to bear in mind that these assets could increase or decrease in value in the future.

4) Annual revenue is expected to keep climbing

According to March 2024 forecasts from the Office for Budget Responsibility (OBR), a combined £40 billion will be collected in inheritance tax between April 2023 and April 2028.

*Source: Office for Budget Responsibility

5) You could do something about it

There are plenty of perfectly legal steps you can take to protect your family's wealth from the taxman. The inheritance tax solutions include annual exemptions, allowances, direct gifts and trusts.

Of course, there are many different options to choose from – so it’s important you find one that’s right for you. With this in mind, and the fact that inheritance tax can be a complex subject, it’s worth speaking to a financial adviser. They can point you in the right direction, guide you through the complexities – and help you put suitable plans in place.

Think you may have an inheritance tax liability?

Don’t worry – we can find out for you, and help you plan accordingly. Call us today on 0345 600 6804 for a no obligation phone consultation to see if financial advice is right for you.

Important information

The Financial Conduct Authority doesn't regulate Trust planning and most forms of Inheritance tax (IHT) planning.

Some IHT planning solutions put your money at risk and you may get back less than you invested. IHT thresholds depend on individual circumstances and the law. Tax and IHT rules may change in the future.

Get in touch and get started

For more information on our inheritance tax planning service and to find out whether you could benefit from financial advice, call our team today for a free initial consultation.

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