Inheritance tax is the tax payable on the transfer of money or property upon the death of the owner. It may sometimes be referred to as ‘estate tax’ – although international law does establish differences existing between the two. It is important to note that not all inheritance is necessarily taxable, and inheritance must meet a stipulated threshold. For example, inheritance is not taxed if the measurable value is below £325,000. Typically, it will be the executor of the will that is tasked with handling this.
You must report to HM Revenue and Customs (HMRC) if you receive any inheritance, as an inheritance form must be filed in order to complete the process. If inheritance is to be charged, the standard tax rate is 40%, although the percentage charged against the property can be reduced to 36% if 10% of it is transferred to a charity organisation. Even with these percentages in mind, inheritance tax can be complex and there are certain calculations which must be considered. That’s why Nordens are here to help you through. As much as possible, we help our clients save money throughout the inheritance process. This is because inheritance tax, if handled wrongly, can cost you far more than is necessary.
That is why seeking expert financial advice during this time is crucial. At Nordens, we strive to provide you with financial advice in the form of simple, money-saving steps and reliable support at every turn. We’ll even guide you on how inheritance tax rules apply to your current asset(s). We’re here to help you feel comfortable in all things financial. That’s why, at Nordens, you can reach an array of experts in everything from wills and trusts to tax and inheritance-planning at any given point.
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Here at Nordens, we understand that you want to know more about Inheritance Tax. To keep you well-informed, here’s a list of our most frequently asked questions:
Inheritance tax is paid on the value of an asset that is passed across in the event of the owner’s death. It is one of the most controversial issues that arises following the loss of a loved one. This tax is enforced as a means of redistributing income equally so that the income gap remains fair and stable. The money collected from inheritance tax is then reinvested back into society by the government for the benefit of all.
There are many policies involved in the 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. The threshold is transferable to the estate of a surviving spouse or civil partner, however. In this instance, the threshold is doubled and becomes £650,000. As a result of this, the percentage to be charged is reduced.
When it comes to inheritance tax, you will likely come face-to-face with a charge which feels frustrating. There are, however, many ways to reduce the amount payable. For instance: by giving some assets to charity or social communities. By leaving assets to charity, your tax is calculated at a lower rate of 36%, rather than 40%. In the instance of marriage or civil partnership, you can give your inheritance to your partner – provided they are a permanent UK resident. You may even opt to put some of your inheritance into a trust, as capital gains put under the umbrella of ‘trust’ will not accrue charges.
Heirs have to pay inheritance tax of 40% – this means that property often cannot be transferred in its entirety. Of course, when what is being inherited has to be sold in order to pay the tax bill – this often does not seem fair. There are many ways that Nordens can help you negotiate this, and it is always advisable to consult with a financial advisor before taking any steps.
Traditionally, inheritance tax must be paid within six months of the death of the loved one. In some circumstances – such as family disputes and interpretation of the will – the payment of inheritance tax can be deferred. In certain cases this can be the case for up to ten years. In this instance, there may be an agreement made, stipulating that the charges can be paid in instalments. For example, if the deceased holds over 50% of shares or bonds in a company, any inheritance tax that is applicable can be paid in agreed-upon instalments. Meanwhile, it should be noted that deferring the payment of inheritance tax means that interest will become a factor.
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