Inheritance Tax (IHT) is paid on all estates over a certain tax-exempt amount known as the ‘nil rate band’. The current nil rate band is £325,000 per individual and will be maintained at this level until at least April 2023. IHT is payable on all assets above the nil rate band at a rate of 40%.
It was Benjamin Franklin who famously stated:
The only certainties in life are death and taxes
In fact in the case of IHT this is not entirely true and it was Lord Jenkins who stated:
Inheritance Tax is a voluntary tax, paid by those who distrust their heirs more than they dislike the Inland Revenue
Inheritance tax has affected a growing number of people in the UK, mainly because IHT thresholds have not risen in line with house prices. This means that it no longer affects only the wealthy, and can quite easily affect people with relatively modest means.
On death the tax is paid by the executors of your estate, from your remaining assets. This means that your loved ones can be left with a significant tax bill if you do not plan ahead. It is worth noting that any tax bill must be paid before any assets from the estate can be released.
Fortunately, with the IHT mitigation opportunities currently available, it should be possible to reduce or even entirely eliminate your IHT liability. The main strategies for minimising IHT are:
Rosan Helmsley are happy to review all your financial planning in respect of inheritance tax and our attached Key Guide sets out all the current exemptions and relevant factors to consider around inheritance tax and Will planning.