Your Estate is made up of everything that you own. This includes your property, investments, pensions and your possessions (such as cars, watches, and even furniture!).

Inheritance Tax is a tax that’s paid if a deceased person’s estate is worth more than £325,000 at the time of their death. This is called the threshold. 

The rate of Inheritance Tax is 40% on the amount that’s above the threshold. It’s important to remember that tax is only charged on the amount of money that’s above the threshold, not the full figure.

Some gifts that you give when you’re alive, such as money, property, or stocks and shares, might also be taxed after you pass away. 

If you give an expensive gift to a loved one who isn’t your spouse or civil partner within seven years, this is liable to be taxed. However, the amount of tax that you or your loved ones will need to pay can vary. If a gift’s given within three years of your death, it’ll be taxed at 40% – but if it’s given three to seven years before, it’ll be taxed using ‘taper relief’. This means that the rate of tax might be lower than 40%.

So, will you need to pay it?

Put simply, if everything that you own adds up to a higher value than £325,000, or you’ve given away an expensive gift or considerable amount of money to friends or family, you might be liable to pay Inheritance Tax. 

If your estate adds up to less than £325,000, or you leave everything above the threshold to your spouse, civil partner, or charity, you shouldn’t have to pay Inheritance Tax. 

However, by carefully planning ahead, we can help you to reduce your Inheritance Tax bill – maybe even to zero! If you’d like to discuss your options or if you’re having issues with estate planning, give us a call today for a friendly chat!