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Inheritance tax (IHT) has traditionally been seen as a tax only for the very wealthy. However, with a threshold of £325,000 (£650,000 for married couples and civil partners for 2011/12) and the price of houses in this country at all time highs, more and more people are finding themselves caught in the trap.
Inheritance tax is paid when someone passes over ownership of their assets on death. Each individual is entitled to a nil rate band under which no inheritance tax is payable and traditionally very few estates have exceeded this nil rate band.
Although inheritance tax is technically payable on the transfer of assets after death, there are a number of measures in place to ensure that people don’t simply hand everything over to their loved ones on their death beds to avoid it. Any gifts given within the seven years prior to death need to be included in the value of an estate for inheritance tax assessment. Equally, you shouldn’t forget ISAs, death-in-service benefit, foreign homes or less obvious assets such as paintings or cars, when calculating the value of your estate.
Inheritance tax planning is a complex area, however careful planning helps ensure you take advantage of all the allowances and relief’s available and could save you a lot of money.
The Financial Services Authority does not regulate taxation and trust advice.