All individuals are entitled to a ‘nil rate band’ – This is an inheritance tax free (IHT) amount, which is currently set at £325,000. Any assets that form part of your estate, on death, in excess of the nil rate band, will be taxed at 40% (36% if charity donation meets a certain limit). If you are married or in a civil partnership, any % of unused nil rate band, can be transferred to the surviving spouse/ civil partner. The assets that form part of your estate will depend on your domicile status for IHT. If you are deemed UK domicile, your estate will include worldwide assets, whereas if you are deemed non UK domicile, your estate will only include UK assets.
Examples of assets:
- Shares (where they are registered)
- Land and Building (where they are located)
- Chattels, for example a painting (where they are located)
- Debt (where debtor is located)
It is important to note that when reviewing your estate assets, gifts made within the previous 7 years will also form part of your estate on death. There are a number of reliefs and exemptions that will reduce your IHT exposure on death. It is vital to take steps early to help reduce your IHT exposure and also ensure that your assets are passed to the next generation in a tax efficient manner. If you missed the IHT seminar, click here to watch the full presentation. Alternately if you would like to discuss options and how best to minimise IHT, please contact a member of the tax department.