Although Inheritance tax is an issue that has been discussed for some time now, many people are concerned about how much they leave behind and whether it will be taxed. It is important to be aware of the legal issues around it and how you can plan your Will to deal with these issues.
What can be taxed?
In simple terms any assets that are owned, joint owned or passed on can be taxed. The tax is paid at 40% if the amount inherited is over £325,000. However, if more than 10% is left to charity this rate is then cut to 36%. It is also worth calculating the cost of burial and funeral costs as well.
There are some exemptions – for example gifts of up to £3000 can be given per year and this can reduce the amount taxed, with £250 per year to people who are not those recipients (so your partner or a charity could receive £3,000 while you may choose to give £250 to your children or grandchildren).
Wedding gifts or gifts for a civil partnership are also an exemption – if you are the parent of the couple this can be as much as £5,000, for a grandparent £2,500 or for anyone else (a sibling, relative, godparent or friend) this can be £1,000.
As someone who receives an inheritance it is important to be aware that this can affect your tax band – it can mean you pay more tax due to being in a higher band or it may affect your age related allowance.
There are also issues with Capital Gains Tax – this can occur if an asset has increased in value (note this is taxed on the increased value not on the actual asset).
In 2015 the “family home allowance” was changed to take into account the increase in house prices. This means that people can pass on their home to their children at a higher threshold (previously the amount was a minimum of £650,000, now it is £1 million).
Get legal help
These are just a few examples of the legal issues concerning inheritance tax and it is worth being aware of this before drawing up a Will or discussing inheritance. This is not just in terms of reducing the amount of tax paid but also in terms of knowing how to do so legally and for giving you and your inheritors peace of mind.
At Larcomes we believe in being “large enough to special, small enough to care.” What this means is that we have the resources in order to find specialist help to deal with the legal issues around making wills and inheritance tax.
Equally, we are aware this is not an easy thing to discuss and there are potential problems that can occur. With more people remarrying this can get complicated. This is why we recommend contacting our inheritance tax specialists to help you get the peace of mind you deserve and to help you find the ideal solution to suit your needs.