However, if you give away your home to your children or grandchildren, your threshold will increase to £475,000.
It is worth adding that if you are married or in a civil partnership and your estate is worth less than the threshold, any remainder can be added to your partner’s threshold. In effect, this means their threshold can be as much as £950,000.
The standard inheritance tax rate is 40% and is only charged on the part of your estate that’s above the threshold.
So, for instance, if your estate is worth £600,000 and your tax-free threshold is £325,000. The inheritance tax charged will be 40% of £275,000 (£600,000 minus £325,000).
It is the funds from an estate which are used to pay inheritance tax to HM Revenue and Customs (HMRC). This is done by the person dealing with the estate, who is known as the ‘executor’ in cases where there is a will.
The beneficiaries, who are the people who inherit the estate, don’t normally pay tax on what they inherit. However, they may have related taxes to pay, for example, if they receive rental income from a house left to them in a will.
Reliefs and exemptions to inheritance tax
There are several reliefs and exemptions to inheritance tax, including but not limited to:
- The estate can pay inheritance tax at a reduced rate of 36% on some assets if 10% or more of the estate’s ‘net value’ is left to charity
- Business Relief can allow some assets to be passed on free of inheritance tax or with a reduced bill
- There are a number of exemptions for gifts, for example if the gift-giver lives for 7 years following the gift
Reliefs and exemptions from inheritance are numerous, the above is just a small number of examples in a complex area. We highly recommend speaking to an expert about the options available to you.
Why choose us?
We acknowledge that this can be a complex process, which is why expert advice from Keoghs is important to ensure that you are getting the information and assistance you need. Our inheritance tax solicitors can aid you with how to make the most of inheritance tax reliefs in order for you to pass on as much as you can to your loved ones. The areas we cover include:
- Inheritance tax returns
- Estate and inheritance tax planning
- International inheritance tax
- Inheritance tax thresholds (for unmarried couples)
- Use of trusts to ensure that assets remain with those close to you
Keoghs, Nicholls, Lindsell and Harris LLP have been providing legal services to people in Manchester and the surrounding areas for almost 300 years. We have offices in Altrincham and Stockport, . and our inheritance tax solicitors would be happy to discuss your situation with to help put your mind at ease.
We provide a bespoke high quality professional service. It is therefore important that we see our clients in person both at the start of the case and from time to time thereafter. Due to logistical and time constraints for both clients and ourselves, as a general rule most of our clients are based in the North West predominantly Cheshire, North Wales, South and West Yorkshire and Staffordshire.