A few years ago, insurance company NFU Mutual analysed HM Revenue & Customs receipts and found that the average Inheritance Tax bill for the year 2018/19 was £199,000.
£199,000! That’s a lot of money …
By taking tax planning action in advance, it is possible to legitimately reduce the amount of inheritance tax payable on an estate.
We look at how you may be able to reduce or avoid Inheritance Tax being paid on your estate.
The Inheritance Tax Threshold
No Inheritance Tax is payable on the first £325,000 of any estate (for the 2022/23 tax year), also known as the Nil Rate Band.
The Inheritance Tax rate is currently 40 per cent, which can result in a substantial bill for many estates (see the figure cited above for reference!). By taking tax planning action in advance, it is possible to legitimately reduce the amount payable.
There is no Inheritance Tax payable if you leave everything to your spouse or civil partner or to a charity or a community amateur sports club, but in many cases you will need to make a Will for this to apply.
The Nil Rate Band is also transferrable to a spouse or civil partner if it is not used, meaning that a couple could have a total Nil Rate Band of £650,000 available when they have both passed away. Again, many couples will need to make a Will for this to apply.
Under the Rules of Intestacy, a spouse or civil partner cannot inherit the entire estate if the deceased spouse/civil partner has children and the value of the estate is greater than £270,000.
If you are married or in a civil partnership, you can make a Will leaving your estate to your spouse or civil partner to avoid Inheritance Tax being payable on your passing.
If you would like to know more about reducing your Inheritance Tax liability or making a Will, contact us by ringing 0203 488 3997 or email us at info@ashtongrace.co.uk