This is the tax payable to the tax authority on the transfer of money or property upon the death of the owner. Usually, it is also referred to as Estate tax although International law establishes the differences existing between both. Similarly, it is not every inheritance that is taxable. There is a stipulated threshold that makes an inheritance taxable. An inheritance is not taxed if:
Note that the tax is on the property or money and it is not the beneficiaries who are expected to pay. It is the funds from the estate that the tax is paid from. The beneficiaries may have to pay for rental incomes receivable from a property to be passed to them in the deceased’s will. Usually, the executor of the will handles this.
Irrespective of the case applicable, you still have to report to HM Revenue and Customs (HMRC). There is an Inheritance form to be filed in order to carry through the process. On the other hand, if inheritance is to be charged, the standard tax rate is 40%. The percentage charged against the property can only be reduced to 36% if 10% of it is to be transferred to a charity organisation.
There is a calculation involved in knowing the tax rate to be paid on inheritance. Nordens is available to carry you through the requirement. We will help you to use the calculator where applicable. Other things which are well disposed to doing on your behalf are:
Knowing these are essential before commencing with the process involved. Having ascertained all these, we will proceed with collecting and filling all forms for Inheritance tax. As much as possible, we help our clients to save money legally by suggesting ways to cut it. So many people are aware that Inheritance tax can cost a lot of money. It is therefore advisable to seek financial expert advice ahead of the process. Nordens provides financial advice simple steps that you can take to avoid paying too much that can be afforded from the property. In addition, we will guide you on how the Inheritance tax rules apply to your asset.
We are here to make you comfortable in all things. You can always reach our wills, trusts and tax experts on Inheritance Tax planning. Meanwhile, we are glad to provide answers to some of the frequently asked questions below.
Inheritance Tax is paid on the value of an asset that is passed across in the situation of the owner’s death. It becomes an issue upon death and it is one of the most controversial issues that transfer of ownership bears. It is a policy which attempts to distribute income equally among all the social and economic classes in a society. The motive is to ensure that the income gap in society is fair and stable. The money gained from Inheritance tax is still turned back into society by the government for the benefit of all.
There are policies involved in tax payable on inheritance. The current threshold is £325, 000. This means if the measurable value of the property is below £325,000, there is an exemption. On the other hand, if the measurable value exceeds the amount stated above without any benefit of tax reliefs, 40% will be charged on the value of the asset or property.
Meanwhile, the threshold is transferable to the estate of a surviving spouse or the party to a civil partnership. In this instance, a double threshold is benefited. This becomes £650,000 and thus; the percentage to be charged will be reduced.
When it comes to Inheritance tax, you may end up with an amount that you find annoying. There are however ways in which you can reduce the amount payable. You can reduce it by giving some assets out to charity or social communities. By leaving assets to charity, your tax is calculated using 36% rate instead of 40%. In the instance of marriage or civil partnership, you can give your inheritance to your partner who is a permanent resident in UK. Also, you can opt for putting some into a trust in your way. The capital gain of whatever is put under trust does not accrue a liability.
Heirs have to pay Inheritance Tax of 40%, this means the property cannot be transferred in all its entirety. It does not seem a fair deal when almost what is being passed has to be sold in order to pay the tax bill. Thus; avoiding Inheritance tax is not a bad idea after all. There are several ways to do this legally. It is advisable to consult with a financial advisor before taking any step. You should be reminded that HMRC has penalties for defaulters. Useful ways include giving away those assets that are free from Capital gains tax, putting assets into a trust or donating to charity.
Traditionally, Inheritance tax is payable within the sixth month after the former holder passes on. Given some circumstances like family disagreement and interpretation of the will, the payment of inheritance tax can be deferred for about ten years. Usually, there is going to be an agreement concerning how to pay in instalments. For example, if a deceased holds over 50% of shares or bonds in a company, any Inheritance Tax that is applicable can be paid in instalments. Meanwhile, it should be noted that deferring the payment of Inheritance Tax means you will have to pay interest.