What is inheritance tax?
Inheritance tax is a tax payable to the government when a person dies. The tax is payable by the estate and is only payable when estates exceed the value of £325,000. The rate of inheritance tax is 40%.
For example if someone dies with a net estate valued at £320,000 there is no inheritance tax to be paid.
However, if they died with a net estate valued at £425,000, inheritance tax would be payable on £100,000 (£425,000-£325,000). This is not the amount of tax to be paid, but the amount that is chargeable to inheritance tax at a rate of 40%. The tax payable to the government by their estate would be £40,000.
Are there any reliefs to inheritance tax?
The government has introduced an additional relief called the Residence Nil Rate Band, which is only available in very specific circumstances.
For the estate to qualify for the Residence Nil Rate Band, the person who has passed away must have an interest in a property at the date of death and be leaving that interest in the property to their children, or grandchildren. The Residence Nil Rate Band is £175,000.
This creates a higher threshold for when inheritance tax must be paid. Valuing the estate and the rules around the availability of inheritance tax reliefs are complicated and advice should be sought from a qualified solicitor.
Our experienced probate and estate administration solicitors can help to make this difficult time as stress free as possible. If you need advice with a loved one’s estate, please get in touch using the form below or call us on 0203 507 1609.
DEMYSTIFYING THE ESTATE ADMINISTRATION PROCESS
Our team is experienced in helping clients to deal effectively with the complexities of administering an estate. If you have a loved one who has passed away, James Beresford, Head of the Probate and Estate Administration team looks to demystify this complex and confusing area of law in our series of vlogs here.
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