Inheritance tax labelled ‘unfair’ and ‘cruel’ by expert
We use your sign-up to provide content in ways you’ve consented to and to improve our understanding of you. This may include adverts from us and 3rd parties based on our understanding. You can unsubscribe at any time. More info
Inheritance tax is a levy payable to HM Revenue and Customs (HMRC) upon a person’s death on the value of their estate above a particular threshold – usually £325,000. At present, it is charged at a flat rate of 40 percent, with many individuals falling into the tax net. With many loathing the idea of their family and friends paying tax upon their death, certain individuals will want to take steps ahead of time.
Many are hoping to plan their estate while they are alive to reduce or eliminate their IHT bill later down the line.
With this in mind, Express.co.uk spoke exclusively to Lee Platt, Director at Barclays Wealth and Investment, who provided further insight, encouraging Britons to examine what is known as the nil-rate band – the amount up to which an estate has no IHT to pay.
He said: “Every individual in the UK has an allowance against Inheritance Tax which is known as the nil-rate band.
“At the moment, it is at a fixed rate of £325,000 per person, but if you are married, then your nil-rate bands are combined – a total of £650,000.
“You essentially will not pay any Inheritance Tax on the value of your estate up to that allowance.
“Anything in excess of that allowance would be chargeable to Inheritance Tax at a flat rate of 40 percent.
“Most people only get to use that allowance once when they die, but many people aren’t aware of the fact they can use that allowance multiple times throughout their lifetime.
“As an example, a person could make a gift outright or into a trust of up to the nil-rate band – then should they live seven years it will become completely exempt due to IHT rules.
Britons turn to Universal Credit & PIP as ‘income gaps’ exposed [ANALYSIS]
Great news for savers as bank increases ‘enticing’ interest rates [UPDATE]
Free bus pass: Where you live could affect when you get one [INSIGHT]
“Then the allowance this person has used will then be given back to them, restored, to use again or when they die.”
But Mr Platt went on to highlight that many are not taking advantage of the options which are available to them when it comes to managing their estate.
As a result, individuals could be missing out on the chance to drastically lower their bill.
He continued: “Lots of people are unaware of the fact they could get multiple bites of the cherry, which can be good in terms of gifting to reduce an Inheritance Tax bill.
“That is quite a valuable thing for people to be aware of and consider when looking at their estate.
“Of course, this is only likely to be an option for those who have a sizeable sum that they are happy to gift away.
“However, the principle is there and individuals can use an allowance multiple times if they have the facility to do so.”
Finally, whatever decision a person chooses to make on their estate, it is important, Mr Platt states, to involve others.
Opening up the conversation to loved ones allows everyone to be kept in the loop about monetary choices and tax implications.
He said: “You should certainly be including your family within this kind of conversation, particularly if you are looking to pass money on to others while you are alive.
What is happening where you live? Find out by adding your postcode or visit InYourArea
“Ultimately, seeing family enjoying and using that wealth potentially when they need it most can be rewarding, and including them in this conversation can be really important.
“This is not just on the basis that people want their family to benefit from the wealth though.
“Instead, there is a valuable form of education here in trying to make sure the people who receive your money are educated about what the implications could be from a tax perspective.
“Have a conversation with your family about what happens if you die within a certain amount of time, and the position they could be left in.
“But the important matter is that this kind of advice should be coming from a professional in order to guide the family conversation.”
Source: Read Full Article