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Inheritance Tax (IHT) is a tax on the property, money or possessions that you leave behind when you die, and on some gifts that you make in the last years before you die.
A certain amount of these assets can be passed on tax-free, the Nil Rate Band (or the 'tax-free allowance'). The Nil Rate Band is currently £325,000. If you pass your assets to your spouse or civil partner then no Inheritance Tax is payable at all (provided that both spouses or civil partners are permanently resident in the UK)
Anything left to charities is also exempt from Inheritance Tax.
Gifts of up to £3,000 in each tax year are exempt from Inheritance Tax and it is important to remember that each spouse can make a gift of £3,000 in each tax year. There are also a number of other exemptions and reliefs that we can advise you on.
Married couples and civil partners are allowed to pass their possessions and assets to each other tax-free and, since October 2007, the surviving spouse or civil partner is now allowed to use the unused proportion (expressed as a percentage) of the Nil Rate Band (to the extent that it was not used on the first death).
Care needs to be taken in order to accurately prove when any unused portion of the Nil Rate Band transfers from one spouse to another.
If you require more assistance on Inheritance Tax, either following a death or in estate planning, then please give us a call.