Inheritance Tax (IHT) is currently paid on assets in your estate over the current Nil Rate Band of £325,000. Any assets held above £325,000 will be taxed at 40% and this tax will need to be paid to HMRC prior to the assets in the estate being released to the beneficiaries. If you hold assets jointly with your spouse you currently have a joint Nil Rate Band of £650,000 and are able to pass on your assets and Nil Rate Band to your spouse on first death.
The Government recently announced that the nil rate band would gradually be increased over the next 4 years so by April 2021 the Nil Rate Band would be £500,000, by introducing the Residential Nil Rate Band.
It has often been said that IHT is an avoidable tax because with financial planning you are able to mitigate your beneficiaries paying the tax by gifting money, using trusts or life assurance products to reduce the value of your estate.
IHT can be a complex area within financial planning and therefore it is important that you seek financial advice. Fairstone are not tax advisers and specialist tax advice should be sought.”