What is Inheritance Tax?
Inheritance Tax (IHT) is a tax paid to the Government when you die on the value of everything you own. If the total value of your assets is less than £300,000 (2007/08 tax year), under current legislation there won't be any IHT to pay. This is known as the "nil rate band" (NRB)
For Example NRB assets from £0 - £300,000 -no IHT liability..
But, for every penny above the £300,000 NRB threshold could be taxed at an eye watering 40%.
The Chancellor usually sets the nil rate band for IHT and the rate of tax each year in the budget.
Examples (2005/06 tax year)
| |
Estate 1 |
Estate 2 |
Estate 3 |
Estate 4 |
| Estate Value |
£500,000 |
750,000 |
£1,000,000 |
£2,000,000 |
Amount of estate potentially
liable to IHT |
£200,000 |
£450,000 |
£700,000 |
£1,700,000 |
| Tax bill (IHT) payable at 40% |
£80,000 |
£180,000 |
£280,000 |
£680,000 |
Figures assume that you are a single person & no IHT planning has been put into place.
Will Inheritance Tax affect me ?
Rapidly increasing house prices have meant that far more people are now affected by Inheritance Tax than used to be. When you add up the value of all your possessions, your house, car, furniture, etc, your estate could be worth more than you realise.
Why is IHT a problem ?
Not only could your family and friends receive significantly less, but any IHT owed must be settled before your assets can be released. This could mean there is a delay in receiving their inheritance. This can place an extra burden for your loved ones when they are going through the grieving process.
Who is responsible for paying any Inheritance Tax?
Your executors will be responsible. If you have chosen members of your family as executors, via your will ,this could mean even greater stress for them at a difficult time.
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