A Short Guide to Inheritance Tax (IHT)
At Myers Clark we help people plan for their future. This includes tax planning and whether it is for business or personal taxation, planning for your future is essential and is at the heart of what we do. Inheritance Tax is one of the main areas where planning ahead can make a big difference. Here are some frequently asked questions about Inheritance Tax.
What is Inheritance Tax?
Inheritance Tax can arise when transferring the wealth of one person to another. The most common situation is when an individual dies, leaving behind their assets to others. These assets include money, savings and property. The estate is then assessed, with the value of these assets being calculated in order to determine whether it is liable for Inheritance Tax.
What is the nil rate band?
This is the value of your estate that you can leave to anyone before any IHT is applied. The current nil rate band is £325,000 and can be £650,000 for couples as it is transferable between those who are married or in civil partnerships.
What is the residence nil rate band?
This is an extension to the nil rate band, and is available to homeowners who leave their house to their direct decedents. The aim is it will provide an additional £175,000 of nil rate band once fully implemented.
What is the rate of Inheritance Tax?
Will my estate be exposed to Inheritance Tax when I die?
This depends on five principal factors:
- What is the value of your estate at the time of your death?
- Did you make any lifetime gifts within seven years of death, and, if so, what was the value of the gift and who received it?
- Do any of your assets have relief from, or are they exempt from, IHT at the time of your death?
- Who are you leaving your estate to? Are any of the beneficiaries "exempt" from IHT?
- How much "nil rate band" and "residence nil rate band" do you have available at the time of your death?
What type of assets are exempt from IHT?
The main reliefs are:
- Interests in businesses that have been owned by you for more than two years and qualify for "business property relief".
- Interests in agricultural property that have been owned and occupied for the purposes of agriculture by you for more than two years, or have been owned by you but occupied by someone else for the purposes of agriculture for more than seven years, that qualify for "agricultural property relief".
Need further information?
Contact us today for further information on Inheritance Tax and planning ahead for the future.