Inheritance Tax is charged on the estate of an individual who has died. The standard rate of Inheritance Tax is 40% and this is applied by HMRC to any estate over the Nil Rate Band, which is presently set at £325,000. Further thresholds can be added to this figure when your home is gifted to your children (or grandchildren) or when your spouse has predeceased.
The additional threshold when gifting to your children is known as a Residence Nil Rate Band. This came into operation on 6 April 2017 (and applied to deaths occurring only after this date) initially at a level of £100,000 with increases of £25,000 planned for the following three Tax Years.
You could be forgiven for assuming that making this additional threshold available to estates across the UK would reduce the amount of receipts to HMRC, however the figures not only show a steady increase over the years, but a stark realisation of just how much this form of tax contributes;
Tax Year Receipts
2015-2016 £4.4 billion
2016-2017 £4.8 billion
2017-2018 £5.2 billion
It is not always possible to completely remove an Inheritance Tax liability from an individual’s estate, particularly if they are/were unmarried or without children, but mitigation of the tax can be considered. Bequests incorporated within a Will to charities or a community amateur sports club can reduce or, in some cases, completely remove an Inheritance Tax liability.
Each individual case should be reviewed on their own merits and legal advice sought to firstly establish your current Inheritance Tax position and thereafter what can be done to mitigate this, should that be your wish. We at Paris Steele would be delighted to assist in this process.
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