We provide the right advice and careful financial planning, HM Revenue and Customs can become the single largest beneficiary of your estate following your death. The recent introduction of the residence nil rate band has served only to confuse people further.
The levels and bases of taxation and reliefs from taxation can change at any time. The value of any tax reliefs depends on individual circumstances.
Death duties have been with us for centuries, in the guise of Estate Duty, Capital Transfer Tax and now Inheritance Tax (IHT). Irrespective of the name used, the purpose has always and will always be the same; to raise revenue from the estates of citizens.
Once considered a tax on the truly affluent, IHT now affects more estates than ever. It will undoubtedly come as a shock to discover that a large proportion of your wealth, which includes all of your assets such as the family home, investments including Individual Savings Accounts (ISAs), life assurance plans not in trust, and even old family heirlooms might actually have to be sold in order to meet the tax liability on death.
The first £325,000 of an individual’s estate (referred to as the nil rate band) is taxed at 0% and is not therefore liable to IHT.
The entire estate in excess of the nil rate band is taxed at a flat rate of 40% assuming no charitable bequests.
From 6 April 2017, each person will get an additional £100,000* (rising to £175,000 by 2020/21) tax free allowance to use against the value of their home if passed to a direct descendant.