In brief, Inheritance Tax (IHT) may be chargeable upon death and may also potentially arise on lifetime transfers (for example on the transfer of assets or rights between individuals, or between an individual and a trust, or between trusts).
Subject to reliefs and exemptions, there is usually no inheritance tax to pay if the value of your estate is below the £325,000 “nil rate band” threshold and you leave everything above the £325,000 threshold to your spouse.
The standard rate of IHT upon death is 40% and, subject to reliefs and exemptions, IHT may be charged on the value of your estate above the £325,000 threshold.
If your estate is over £325,000 you should consider obtaining inheritance tax planning advice as soon as possible in order to help minimise the potential 40% charge to inheritance tax upon death.
The charge to inheritance tax on death:
IHT and the associated reliefs and exemptions are complex. In brief, when calculating the liability to IHT on death you take into account the total value of assets owned by the deceased at death, gifts made within the seven years before death, and trust interests. A deduction from that total will be made for any genuine liabilities.
Relief may also be claimed for business relief or agricultural relief (where appropriate) together with other applicable reliefs or exemptions (for example, the main residence nil rate band and the transferable nil-rate band).
Full and comprehensive enquiries must be made and there are several critical issues to consider including the correct basis of valuations and whether some transfers fall within the gift with reservation rules.
The charge to inheritance tax on lifetime transfers:
An IHT liability potentially arises on the transfer of assets or rights between individuals, or between an individual and a trust, or between trusts, in any situation where the transaction is not intended to be a normal commercial transaction and importantly where an element of bounty or gift is involved. Equally, there will be some gifts that do not trigger a potential IHT exposure because they are covered by available exemptions or reliefs, for example, gifts out of income, gifts for the maintenance of the family and some small lifetime gifts.
Where the gift does constitute a potential IHT event, it will be necessary to establish the IHT value. Complex and different valuation methods and computations apply in order to ascertain the potential charge to IHT on lifetime transfers.
How can we assist?
Being proactive is the key. The sooner you obtain inheritance tax advice, the better. Our team of highly experienced Private Client solicitors will carefully analyse your estate with reference to the inheritance tax reliefs, exemptions, and all other considerations, and they will be able to provide you with advice in relation to your potential current inheritance tax liability.
Inevitably, there is a wide range of separate elements that need to be mastered before the jigsaw is complete and the correct inheritance tax liability is correctly calculated.
Our team of Private Client solicitors will provide you with specialist and up to date inheritance tax advice - this is the backbone of an effective plan to minimise the inheritance tax potentially due either during your lifetime or upon death.
