Not everyone pays inheritance tax. It is only due if your estate, which is defined as everything an individual owns either outright or has a share in, minus any liabilities – is valued over the current inheritance tax threshold (£325,000 in 2014 -15).
Inheritance tax is payable at 40 per cent on the amount over this threshold.
The rate may be reduced to 36% if more than 10% of the estate is left to charity.
Exemptions from inheritance tax include:
- Anything you give or leave to your spouse living in the UK (Limited to £55,000 if your spouse lives outside).
- Any gifts you make to a UK registered charity during your lifetime or in your will
- Bills outstanding at an individual’s death including funeral expenses
Married couples/civil partners
Same-sex couples are treated in the same way as married couples for inheritance tax purposes.
If someone leaves everything to their spouse or civil partner when they die & the partner has their permanent home in the UK it is exempt from Inheritance Tax. As the Inheritance threshold has not been used it can be transferred to their partners estate when they die giving them a doubled threshold of £650,000. This will apply even if they remarry.
Other allowances
In addition to the above an individual can give away part of their savings either within their annual allowances or in some circumstances above these amounts. More information about other allowances can be found on the useful websites below.
Passing on Property
Giving your home to your children or someone else is classed as a gift for Inheritance Tax purposes. Providing that you live for 7 years after giving it away, it is exempt.
If there are certain conditions attached when you give away your home (e.g. if you continue to live in it rent free) it would not be exempt.
Call the Probate & Tax Inheritance Helpline for more details 0845 302 0900
Avoiding or minimising inheritance tax due upon death
Planning for inheritance tax will help to ensure that you can take advantage of any tax relief available; options available including Will Trusts, Discretionary Trusts, Gift Trusts. Professional advice should be sought if you are considering these options.
How to pay inheritance tax
There are various ways to pay the inheritance tax due on an estate, including paying on account or paying in instalments.
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