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 now higher than ever, 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. Read more about our inheritance tax planning service.

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


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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 it is subject to 40% inheritance tax. (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) Your estate isn’t just your home – it’s everything you own

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 in value even further in the future.

3) Annual revenue is reaching record highs

During the past ten years, annual inheritance tax revenue has climbed higher and higher. Over the 2019/20 tax year, £5.3 billion is expected to be collected from families. And by 2023/24, the figure is predicted to be even higher – at a staggering £6.3 billion*.

4) Residence nil rate band – not everyone is affected

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.

But the rules are a lot more complex than many people realise. Amongst the restrictions, you can only use this allowance to pass on your main home to a direct descendant (such as your child or grandchild – not a friend, niece or nephew). Therefore, not everyone can benefit.

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. For peace of mind, simply call us today on 0800 731 5342 for a no obligation phone consultation.

Please be aware that some areas of inheritance tax planning aren’t regulated by the Financial Conduct Authority. Some solutions may put your capital at risk so you may get back less than you originally invested. Thresholds depend on your individual circumstances and prevailing legislation, both of which may change in the future.


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For more information on our service and to find out whether you could benefit from financial advice, call our specialist team today.

*Source: Office for Budget Responsibility

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