Inheritance tax must be paid if a person’s estate is worth more than £325,000* (individual tax threshold limit) when they die. The rate of Inheritance tax is 40% on anything over £325,000 and paid from funds of the estate.
The deadline for starting to pay inheritance tax is by the end of six months from a person’s death, after this the estate has to pay interest. Jeffrey Mills Solicitors can help determine how much inheritance tax you are due to pay, and/or advise if you can pay by instalments.
*The total Inheritance Tax Threshold for those who own a family home will increase from April 2017, until it reaches £500,000 in 2020.
The estate may not have to pay Inheritance Tax on assets that the deceased gave away as gifts. A gift can be anything that has a value (Money, Property, Possessions).
Examples of Gifts:
- You can give gifts up to the value of £250 to as many people as you like in a year
- If a gift of over £6000 has been made then the original owner must live for seven years after giving the gift. If a gift has been made less than seven years before death, it counts towards the Inheritance Tax threshold (£325,000)
- Parents may sell a property for below market value to their children. The difference is considered to be a gift and its value is counted towards your threshold
You do not have to pay Inheritance Tax on ‘annual exemption’. Annual exemption states that the estate does not have to pay Inheritance Tax on up to £3000 worth of gifts given in each tax year. Left over annual exemption can be carried over from one tax year to another; however, the maximum exemption is £6000.
Will Trusts are another way of paying less or no inheritance tax. They are created in an individuals Will, and only come into effect when the person has passed away. (Further details can be found in Trusts.)
Issues regarding inheritance tax can be confusing, Jeffrey Mills Solicitors are here to help. We can assess your situation and advise you on the best course of action on all matters of Inheritance Tax. Contact us for more information.