What does Inheritance Tax mean?
The tax year nears its end so have you used your annual gift exemption for Inheritance Tax (“IHT”) this year?
What Does Inheritance Tax Mean?
Well….. IHT is the tax which applies to your estate on death and it’s 40% on the value above a threshold figure, currently £325,000. There are certain exemptions e.g. inheritances to spouses and charities. Unfortunately IHT also catches the value of gifts made in the seven years prior to death, unless those gifts are exempt. So someone leaving all of their estate to their favourite nephew Jonny on their death-bed doesn’t save tax.
However each person can give away £3,000 to the family (or others) each tax year and this is always exempt. You can also catch up on the previous tax year’s allowance if you didn’t use it last year. There are other gift exemptions which may be useful. The £3,000 figure may not sound much (in fact it hasn’t changed for many years) but you might as well use it.
So as the end of the tax year approaches don’t just think about topping up your ISA – give some thought to estate planning as well.
To find out more, contact a member of our wills and probate team on 033 3344 9600, or complete our contact form.
