When it comes to Inheritance Tax limits – do you know yours? Insurance company Canada Life’s annual survey revealed growing confusion over the operation of inheritance tax.
According to the survey, more than two thirds of respondents did not know the current level of the inheritance tax nil rate band – among adults over the age of 45 with assets in excess of £325,000, some 70% did not know that the threshold for the standard nil rate band is currently £325,000.
Inheritance Tax Limits – Bennett Verby offer sound advice on estate planning
Canada Life’s research also found that over a quarter (27%) of those aged 45 or over with enough assets to trigger a potential IHT bill do not have a will, leaving their inheritance plans unclear and meaning their wealth could pass to relatives they did not intend to provide for under intestacy rules.
Another simple and effective estate planning strategy is to gift money to relatives, but just a fifth of respondents had done so – with over half (51%) saying they don’t see a need.
One of the main reasons that simple estate planning tools are being ignored by people with enough wealth to benefit from them is a lack of understanding that could easily be rectified by better use of financial advice. However, Canada Life’s research found that just 27% of wealthy Brits over the age of 45 have sought professional advice on IHT planning.
Inheritance Tax is a tax on the estate (the property, money and possessions) of someone who’s died.
There’s normally no Inheritance Tax to pay if either:
- the value of your estate is below the £325,000 threshold
- you leave everything to your spouse or civil partner, a charity or a community amateur sports club
If you give away your home to your children (including adopted, foster or stepchildren) or grandchildren, your threshold will increase to £425,000.
If you’re married or in a civil partnership and your estate is worth less than your threshold, any unused threshold can be added to your partner’s threshold when you die. This means their threshold can be as much as £850,000.
Inheritance Tax rates
The standard Inheritance Tax rate is 40%. It’s only charged on the part of your estate that’s above the threshold.
ExampleYour estate is worth £500,000 and your tax-free threshold is £325,000. The Inheritance Tax charged will be 40% of £175,000 (£500,000 minus £325,000).
Thanks to Bennett Verby for providing their Expert Opinion on Inheritance Tax
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