A total of £2bn was raked in by the gov­ern­ment in the form of Inher­i­tance Tax (IHT) between April and June – £0.2bn more than at this time last year accord­ing to HM Rev­enue & Cus­toms (HMRC).

The lat­est HMRC data in July states the June 23 fig­ure is the high­est month­ly total on record & points to recent inter­est rate ris­es plus the sub­se­quent need for charges on over­due tax bills.

What is IHT?

Inher­i­tance Tax is a tax on the Estate of some­one who’s died. There’s nor­mal­ly no IHT to pay if either the val­ue of your Estate is less than £325k or you leave every­thing above £325k to your spouse, civ­il part­ner, a char­i­ty or a com­mu­ni­ty ama­teur sports club.

If you give away your home to your chil­dren (includ­ing adopt­ed, fos­ter or stepchil­dren) or grand­chil­dren your thresh­old can increase to £500k, some­thing known as the Res­i­dence Nil Rate Band.

If you’re mar­ried or in a civ­il part­ner­ship and you leave all your estate to your spouse/​civil part­ner, then on the death of the sec­ond, the sur­viv­ing spouse can use the unused thresh­old of the first to die to increase their thresh­old. This means that you can have up to £650,000 before any IHT is due. 

What’s the big deal with IHT?

The stan­dard IHT rate is 40% & it’s only charged on the part of your Estate that’s above the threshold.

How­ev­er, there are sev­er­al reliefs & exemp­tions to reduce IHT. The Estate can pay IHT at a reduced rate of 36% on some assets if you leave 10% or more of the ​‘net val­ue’ to char­i­ty in your Will. (The net val­ue is the estate’s total val­ue minus any debts.)

Some gifts you give, while you’re alive, may be taxed after your death. Depend­ing on when you gave the gift, ​‘taper relief’ might mean the IHT charged on the gift is less than 40%.

Oth­er reliefs, such as Busi­ness Relief, allow some assets to be passed on free of Inher­i­tance Tax or with a reduced bill.

What can you do?

It’s impor­tant to start plan­ning your Estate as ear­ly as pos­si­ble, par­tic­u­lar­ly if you think it will be sub­ject to IHT. 

Even if you leave it late, it’s impor­tant to con­sult a Pro­bate Solic­i­tor as there are com­plex rules around IHT, par­tic­u­lar­ly the reliefs, & Res­i­dence Nil Rate Band will not be applic­a­ble if the HMRC cri­te­ria are not adhered to.

To arrange a dis­cus­sion about IHT, please get in touch with Rick Bar­row on 01625 523988 or mail@​jbgass.​com