Inheritance Tax what you need to know

Inheritance tax (IHT) is a major part of estate planning.

 

Inheritance Tax- what is it?

Inheritance tax (IHT) is a major part of estate planning. It is a 40% tax payable on the value of your estate that exceeds certain thresholds known as the nil rate band (NRB)

What’s included in an estate?

Your estate is everything that you own of value; this includes your home. Almost a quarter of people in a recent survey did not know their home was included in calculating an estate’s liability to IHT.

Any other items of value such as cars, jewellery, art and investments are also included in calculating an estate’s liability to IHT.

The thresholds 

Individual

Up to £325,000 is free from Inheritance tax. Anything over that will be liable to IHT at 40%.

Jointly (married or civil partnership)

Up to £650,000 is free from IHT by combining individual thresholds, anything over this faces tax charged at 40%. This is not an automatic transfer after the death of the first spouse, it must be applied for.

Residence nil rate band (RNRB)

2017/18 tax year, there is now an extra £100,000 per person i.e. £200,000 per couple – known as Residence Nil Rate Band (RNRB). This will increase by £25,000 per year until 2020. By the 2020/21 tax year it will mean a married couple with children could, subject to certain conditions, have a total IHT nil rate band of £1 million. These conditions can be complicated, so it is important to seek professional financial advice.

HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.

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