Inheritance Tax is a tax on the estate of someone who died. The estate meaning the property, money, and possessions of value.
You would have no inheritance tax to pay if either the value of your estate is below £325,000 threshold or if you leave everything above the £325,000 to your spouse, civil partner, a charity or a community amateur sports club.
However, if you give your home to your children or grandchildren your threshold can increase to £475,000. If you’re married or in a civil partnership and your estate is worth less than your threshold, any unused threshold can be added to your partner’s threshold when you die. This, therefore, means the threshold can then be as much as £950,000
The standard Inheritance Tax rate is currently 40% and it’s only charged on the part of your estate that’s above the threshold. So for example, if your estate is worth £500,000 and your tax-free threshold is £325,000 the tax would just be on the difference of £175,000
Please note that funds from your estate would be used directly to pay any Inheritance Tax due to HMRC. This would be done by the person dealing with the state, known as the executor. If there is a will in place this would obviously impact on how everything is dealt with.
Keli Evans, Director at LJS Accounting Services, excels in taxation and statutory accounts. With a focus on strong client relationships, she leads a diverse portfolio, overseeing vital financial aspects like VAT, payroll, pensions, and taxation with a holistic and committed approach.