The inheritance tax threshold for the UK is £325,000. If your estate is worth more than this, it can cost your estate thousands in inheritance tax, leaving your beneficiaries with less than you wanted. However, there are steps that can be taken to avoid having to pay inheritance tax at all.
Inheritance Tax UK Threshold
Public interest in inheritance tax has grown in recent years due to the rising value of property. Many people have unwittingly got to their later years only to calculate the value of their estate and realise they will have a much greater liability to inheritance tax than expected.
Any estate valued over £325,000 for an individual is taxed at a rate of 40%. This threshold is increased to £650,000 for married couples or civil partners.
This includes all assets from money and investments, to property and belongings. It does not include any debt or funeral costs, so the taxable amount is calculated after these have been paid.
Options to reduce inheritance tax
Inheritance tax can be avoided with careful financial planning to suit your needs. Every individual has a different life plan and maximising your money in later years is just as important as ensuring your family, friends or chosen charitable causes receive the inheritance you desire.
If you haven’t heard of the terms the ‘seven-year rule’ or the ‘main residence nil-rate band,’ then these are ideal topics to start looking into when considering your inheritance tax planning.
The seven-year rule refers to gifting assets in your lifetime, but you must outlive these gifts by at least seven years for them not to be counted in your taxable estate. Further detail on these rules is detailed in your free in inheritance tax guide below.
Inheritance Tax Advice from Newcastle upon Tyne IFA Laurus Associates
Laurus Associates director Colin Dawson said: “The time to start inheritance tax planning is when you are aged 50 plus. In reality, we often meet people when they are already in retirement, as people see this falling under wills and lasting powers of attorney. However, with earlier planning you can ensure you leave your loved ones exactly what you had hoped for.
“Most people seek advice about what the threshold is, how to avoid paying inheritance tax and to understand the variety of options available to them.
“For instance, the introduction of the main residence nil-rate band rule was designed to increase the allowance for many people who are asset rich but not cash rich due to owning property. Unfortunately this rule often catches some people out because the rule only applies to direct descendants. This means siblings, nieces, nephews or any other relatives won’t be applicable to this rule – even if you don’t have any other direct descendants.
“Understanding the ins and outs of every rule can be tricky, and it’s important to find the options that will help achieve your financial goals.
“You can make your inheritance tax plan at any time of year as it is not tax year dependent but it is also important not to put it off. The Government tax take was £4.8 billion in 2016/17 and topped £5 billion for 2017/18. This can be put down to the increase of general wealth and property value, but there is also an element of people not taking the planning opportunities available to them.”
Get your free guide to inheritance tax here
Below you can access a free guide to inheritance tax. If you are looking to understand your options with planning your inheritance and even avoid paying inheritance tax altogether, this guide is great place to start.
Your guide includes:
Understanding how much of your estate is liable for inheritance tax
The threshold and how you can reduce your liability
The ins and outs of the latest options for reducing liability, including:
The nil-rate band
Seven year rule
Tax free gifts
Top tips to get you started
Speak to Karen or Colin on 0191 281 1234 or email firstname.lastname@example.org to discuss the best inheritance tax plan to suit your goals.
Click here to view the free Laurus Associates Guide to Inheritance Tax Planning.
The Laurus Associates Guide Series – next week, Life Insurance
Check back on the blog next week, as we will release your next free guide in our series on financial planning. Next week is a financial planning essential: Life Insurance.