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Struggling to understand Inheritance Tax? Below we’ve compiled a guide to Inheritance Tax. What is it, how it’s claimed, and all about Business Relief for Small Businesses.
What is Inheritance Tax?
Inheritance Tax is always paid to the UK government on the estate (possessions, money, property) of those who have recently died. This is done before those who are specified in the Last Will and Testament receive any of the estate themselves. This process is always undertaken unless the estate is worth less than £325 000, if the entire estate has been left to a partner alone, or if the deceased left their entire estate to a charity. This then means that the current Inheritance Tax threshold in the UK sits at £325 000. If an estate is worth, overall, more than £325 000 – around 40% will be paid to HMRC by the executor of the Will.
Some measures can be put into place if you own a small business that Inheritance Tax will defund. Business Relief could see your Inheritance Tax reduced from 50% – 100%, depending on circumstances. Claiming business relief can be done before the deceased has passed, if it is placed in the will, or it can be claimed by the executor whilst the estate is being valued. To claim for Business Relief, you must fill out an IHT400 form. For more information on business schemes that protect Inheritance Tax, talk to an advisor on the Inheritance Tax Helpline. From there, an advisor will be able to help you regarding Business Relief and other schemes regarding Inheritance Tax.
Inheritance Tax Rate
Inheritance Tax is charged at a fixed rate of 40%. However, if a portion, or all of your Inheritance is to be given to charity, you will have a portion of tax deducted from your overall estate. This is to ensure that charities are not hindered by the current tax rate set by the government. The amount of tax is also reduced if all of your estate is to be recived by a spouse or partner. This is to reduce the impact of loss on the recipient.
The amount of tax on an estate can also be reduced if a small business it included – or if the loss of money will directly hinder or defund a business in an estate. For more information on this scheme from the government, ring the Inheritance Tax helpline. From there an advisor will be able to explain further on how to apply for a tax reprieve from the government.
If a house is left in your will to a sole participant, you will not pay Inheritance Tax on it – however if it is left to someone who does not belong in the family, Inheritance Tax will be applied before they recieve the estate/property in question.
If you are planning to gift family or friends in your will – which you have purchased outside of your current estate – these will not be taxed either. If these gifts exceed 325 00 (the current tax threshold) however, they may be taxed under the current legislation.
If someone who once lived in the UK dies, and they have assets in the UK – only these assets will be taxed by the UK government. Any assets outside of the UK will not come under Inheritance Tax under current legislation.
For more information regarding Inheritance Tax, Business Relief, or passing gifts on to a loved one, ring the Inheritance Tax Helpline. From there, an advisor will be able to help you with queries and questions you may have. If you are struggling to come to terms with the loss of a loved one, speak to someone close to you who can help you overcome feelings of grief. You can also ring the Helpline above for advice on dealing with your current situation.