On death, across a significant number of estates, His Majesty’s Revenue and Customs frequently end up the largest single beneficiary. 

For the remaining beneficiaries, the impact can range from the dramatic to the ruinous.

Inheritance Tax Facts

• Inheritance TAX (IHT) is a tax on the value of a person’s money, possessions and property when they die.

• The first £325,000 of an individual's estate is not liable for IHT. It’s called the Nil Rate Band (NRB). If the value of your estate is greater than £325,000, anything above the NRB could be liable for 40% tax.

• For married couples and registered civil partners where the first person dies, any unused NRB allowance can be transferred to the surviving spouse. This is called the Transferable Nil-Rate Band (TNRB). This effectively doubles the IHT threshold up to £650,000. Again, anything above that amount could be taxed at 40%.

• Since April 2017 the introduction of an additional Residence Nil-Rate Band (RNRB) has been phased in as follows: £100,000 for the tax year 2017/18; £125,000 for the tax year 2018/19; £150,000 for the tax year 2019/20; £175,000 for the tax year 2020/21. And currently still at £175,000 for the 2023/24 tax year.

Thereafter it will increase in line with the Consumer Price Index. 

• The RNRB allowance is intended for people who want to pass their home (or a share of it) to their children or grandchildren (including step-children, adopted children, foster children, children under the age of 18 for whom they’re appointed a guardian). It applies to estates that are “closely inherited” and contain a “qualifying residential interest” – which means that the individual must have owned the property and have lived in it at some point. 

• If you're eligible, it could increase your IHT threshold even further to £500,000 or £1M for married couples and registered civil partners (tax year 2023/24)
  

• For any estates worth more than £2 million (after deducting any liabilities, but before reliefs and exemptions such as Business Relief) then the RNRB will be reduced, or tapered, by £1 for every £2 above the threshold.

What can I do to reduce Inheritance Tax (IHT)?

 As you can see, IHT planning can get very complex. For expert advice contact us today. 

Through St. James's Place we have access to a service, in conjunction with four leading law firms, which is designed to provide a wide range of legal services covering matrimonial issues, general tax planning and Inheritance Tax.

Some things we may talk about are:

• How to correctly plan and write your Will* to save the maximum amount of tax
• Appropriately transferring assets using your lifetime gift allowances
• How to create a tax-efficient fund that enables the beneficiaries of your estate to meet any tax liability without affecting family wealth. 

Under current IHT legislation, pensions can also play a considerable role in estate planning. 

Although pension benefits on death are broadly exempt from Inheritance Tax, if they are passed to a surviving partner they could form part of their estate. We can offer advice on how to prevent this.

If you want to find out how you can take full control of your Inheritance Tax situation, please get in touch.

The value of an investment with St. James's Place will be directly linked to the performance of the funds selected any may fall as well as rise. You may get back less than the amount invested.

The levels and bases of taxation and reliefs from taxation can change at any time. The value of any tax relief depends on individual circumstances.

And will writing involves the referral to a service that is separate and distinct to those offered by St. James's Place. Wills are not regulated by the Financial Conduct Authority.