Tax is generally not a popular subject when it comes to UK finance issues, but it’s one that we all have to face eventually. Whether we’ve talking about income tax or inheritance tax or even just council tax, knowing your rights and requirements every step of the way is very important. The last thing that you want is to end up making critical mistakes that just hurt you in the long run. You are a lot better off tackling the issues ahead of time so that when your situation changes, you’ll be able to make sure that you can focus on the bigger picture.
Today we’re covering Inheritance tax — definitely a tax that’s not quite popular with people, but it’s a tax that can still affect you. It’s debated constantly in the media, and many would cite it as one of the most despised taxes in the UK, hands down. yet a lot of people don’t realize that you might not even have to pay this tax at all, especially if your estate doesn’t exceed a certain value. Here’s what you need to know.
Simply put, an inheritance tax is due when a person dies and leaves behind property, possessions, or cash. It’s a tax based on the total value of their estate. That’s calculated by adding up all of the savings, investments, property value (current value at the time of death), as well as any possessions of value.
The first 325,000 pounds of any estate is actually exempt from Inheritance Tax. It’s called the nil rate band, which means that most people will actually pay little to no inheritance tax.
Anything above the nil rate band of money is set at 40%. That means that you will be paying taxes on the money above that, not on the entire value of the estate. So if you have an estate of 425,000 pounds, the inheritance tax only applies to the 100,000 above the band. That means that you pay 40 thousand pounds worth of inheritance tax. That’s not bad compared to what your actual tax bill could be!
You should also make sure that you’re thinking about the exemptions that can even shield more of your estate from taxes.
Anything left to a spouse or civil partner is exempt, as long as they reside in the UK. In addition, gifts to registered charities are exempt. Wedding gifts are also set aside, along with the value of any farms, businesses, or commercial properties.
Estate planning is a complicated subject at times and you should always make sure that you’re talking with a good solicitor to make sure that everything is taken care of properly. The last thing that you want to do is find that your heirs will have to lose a lot of money to taxes. That won’t help them move on in any way, and no one wants to think about that actually happening. Check it out today!