IHT and Avoiding the Tax Man?
Current UK legislation (as of April 2020) allows for the first £325,000 of your estate to be free from Inheritance Tax. However, although this may sound considerable, when you add up the value of your house, savings and investments and your personal effects, you may be very surprised by how much you are actually worth. With house prices rising, the value of your estate may well be more than the £325,000 Inheritance Tax threshold. However in 2017 the residential nil rate was brought in which now stands at £175,000 however this can only be used against the value of your property and only when it is being left to your children or direct descendants. Both unused standard nil rate and residence nil rate bands can be passed to a married/civil partner.
If at the time of your death you are a widow/widower or bereaved civil partner then this allowance may perhaps be increased to as much as 2 x £325,000 = £650,000 plus 2 x £175,000 = £350,000 providing a potential allowance of potentially £1,000,000 for a surviving spouse/civil partner.
Consequently, under current legislation, the taxman will take 40% of everything you leave over the current £325,000 or £500,000 if you are a property owner or £650,000 if the surviving spouse and deceased partner were not property owners or £1,000,000 if they were .
Many financial advisers believe that this tax can be reduced if not eliminated with some straightforward planning. We do not offer in depth Inheritance Tax advice here as your best course of action would be to sit down with an adviser who can do a full fact find of your situation, take account of all your current and likely future circumstances and advise you as to your best course of action.
So avoiding the taxman for many who have estate values under their nil rate bands is straight forward, your nil rate bands will provide a foil.
