IHT
What is IHT?
Inheritance tax (IHT) is a tax that may be levied on assets that you leave behind when you pass away. Collectively these assets are referred to as your estate, and for the purposes of IHT could incorprate property, capital, investments and any assets that you may have given away in gifts the last seven years of your life or assets held in trust.
Assets passed on to a civil partner or spouse are IHT free providing you are both domicile in the UK. Assets passed to a civil partner or spouse will not count towards the value of the estate for the purposes of IHT. If your partner is not a UK resident but you are then there is a £55,000 limit to the amount that you may pass on IHT free.
IHT threshold
IHT is payable if your estate is worth more than £325,000, and only payable on assets over that threshold. Above this IHT threshold assets are taxed at 40%.
If you are married or in a civil partnership this IHT threshold acts like an allowance. If your partner passes away without 'using up' their £325,000 threshold allowance they may pass the remainder on to you. This means that if, for example, your partner dies and leaves all assets to you, tax free, their allowance can be given to you and you could leave up to £650,000 IHT free when you pass away.
The current IHT threshold of £325,000 is likely to remain in place until 2014-2015.
IHT payment
IHT should be paid within six months from the end of the month in which the person died. After the six month interest is usually payable on any outstanding amount. Find out more about paying IHT.
IHT and trusts
IHT may also be payable on assets when you transfer them into a trust if they are valued at over £325,000. Find out more about trusts and IHT.
IHT planning and professional advice
IHT planning is important in ensuring that your beneficiaries get the most out of your assets when you pass away. With careful planning you may be able to reduce or avoid IHT altogether.
Professional advice can help you to make sense of the complex world of IHT. If you would like tailored guidance on IHT planning contact a member of an independent inheritance tax planning advice team for a free no obligation consultation.
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