Inheritance Tax is due when a person’s estate (their property and possessions) is worth more than £325,000 when they die.
In the 2014/15 tax year, everyone is allowed to leave an estate valued at up to a £325,000 without their beneficiaries paying tax on it. Above that amount, anything you leave behind is subject tax of 40% (or 36% if you leave at least 10% of your assets to a charity).
For example, if you leave behind assets worth £400,000, your estate pays nothing on the first £325,000, and 40% on the remaining £75,000 – a total of £30,000 in tax - if you're not leaving anything to charity.
Inheritance tax for married couples -
There’s usually no Inheritance Tax to pay on anything you leave to your spouse or civil partner (provided they're UK domiciled), even if it’s over the threshold. In addition, your partner’s inheritance tax allowance rises by the amount you didn’t leave to others, meaning together a couple can currently leave £650,000 tax-free.
While transfers of property and other assets between married couples or civil partners don't attract inheritance tax, the rules are different for unmarried couples.
Annual exemption -
The first £3,000 given away each tax year is completely ignored as part of your estate and thus not subject to inheritance tax if you die.The £3000 unused in one year can be carried forward to the immediately succeeding year and used then.
Small gift exemption -
Gifts of no more than £250 to any one recipient per tax year are excluded from inheritance tax (and are not counted toward the annual gift exemption).
Inheritance tax planning is very important to make sure all your hard earned savings don't go to the taxman after you die. It is better to get a WILL done and also seek financial advice, to make sure that you (or your parents) get the financial security at old age.
In the 2014/15 tax year, everyone is allowed to leave an estate valued at up to a £325,000 without their beneficiaries paying tax on it. Above that amount, anything you leave behind is subject tax of 40% (or 36% if you leave at least 10% of your assets to a charity).
For example, if you leave behind assets worth £400,000, your estate pays nothing on the first £325,000, and 40% on the remaining £75,000 – a total of £30,000 in tax - if you're not leaving anything to charity.
Inheritance tax for married couples -
There’s usually no Inheritance Tax to pay on anything you leave to your spouse or civil partner (provided they're UK domiciled), even if it’s over the threshold. In addition, your partner’s inheritance tax allowance rises by the amount you didn’t leave to others, meaning together a couple can currently leave £650,000 tax-free.
While transfers of property and other assets between married couples or civil partners don't attract inheritance tax, the rules are different for unmarried couples.
Annual exemption -
The first £3,000 given away each tax year is completely ignored as part of your estate and thus not subject to inheritance tax if you die.The £3000 unused in one year can be carried forward to the immediately succeeding year and used then.
Small gift exemption -
Gifts of no more than £250 to any one recipient per tax year are excluded from inheritance tax (and are not counted toward the annual gift exemption).
Inheritance tax planning is very important to make sure all your hard earned savings don't go to the taxman after you die. It is better to get a WILL done and also seek financial advice, to make sure that you (or your parents) get the financial security at old age.
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