Inheritance Tax Solicitors

Inheritance Tax is generally a 40% tax on any asset within an estate valued over the inheritance tax threshold of £325,000.

It only applies to the amount over the limit, so an estate valued at £400,000 would pay 40% on the £75,000 that goes over the threshold.

This limit, known as the “Nil Rate Band”, can be affected by a number of factors, and estates below the Nil Rate Band are not liable for Inheritance Tax.

You may also leave any asset over the Nil Rate Band to a spouse, civil partner, or charity, which would also negate any Inheritance Tax costs.

You can give away assets during your lifetime, but if you try to dispose of assets to exclude them from your estate for Inheritance Tax, you may still be liable for Inheritance Tax (this includes lifetime gifts over £3,000). Rules on lifetime gifts are complicated, so you should seek expert legal and financial advice.

Rowlinsons can help you understand your options to effectively manage your wealth to benefit future generations without being charged more than necessary.

There are many options to consider when minimising the Inheritance Tax chargeable to your estate to maximise the inheritance you pass on. More commonly, there are exemptions on the 40% tax over £325,000 for gifts to spouses and charities, and relief schemes are available for business owners and agricultural land owners.

These strategies are complex, which is why it’s essential to speak to an expert. Rowlinsons solicitors can provide clear, beneficial advice on Inheritance Tax planning to help you understand your options and show you the steps you can take so you can leave more behind for your loved ones.

While most assets over your Nil Rate Band Allowance will be considered when calculating the Inheritance Tax on your estate, there are some common exemptions, such as:

• Gifts made to a spouse or civil partner
• Pensions
• Trusts
• Gifts to charities, political parties, or registered community amateur sports clubs

You may also benefit from business and agricultural property relief. This could make 50% or 100% of the business or agricultural assets exempt from IHT: the amount of relief will depend on how long the deceased had owned the business, asset, or shares, and how the business is structured at the time of death. Our Inheritance Tax Solicitors can help you plan ahead to ensure your tax liability is minimised.

Capital Gains Tax (CGT) on inheritance is generally paid from the estate before any money, property, or asset is distributed, so beneficiaries do not need to pay it.

The executor or administrator of the estate will be in charge of calculating and paying any outstanding tax balance on the estate before transferring assets. CGT will apply in situations in which:

• Properties or assets from the estate are sold for a profit
• The deceased sold assets for a profit in the last applicable tax year

With expert, tax efficient financial planning, Rowlinsons Solicitors can help you reduce your IHT bill. Contact our Inheritance Tax Specialists today to find out how we can help you.

The 7-Year rule in Inheritance Tax is a principle that makes gifts made over 7 years before the death of the testator exempt from tax. Gifts made less than 7 years before the death will be considered in the valuation of the estate, and will affect the Nil Band Rate.

The rate of tax paid on gifted assets before death is variable, going from 0% for gifts made over 7 years before death to 40% if the gift was made less than 3 years before.

• Gifts made between 3 and 4 years before death: 32%
• Gifts made between 4 and 5 years before death: 24%
• Gifts made between 5 and 6 years before death: 16%
• Gifts made between 6 and 7 years before death: 8%

If you have left your main property of residence to children or grandchildren, your allowance may increase by £175,000. Additionally, you may use your late civil partner’s or spouse’s allowance if they did not use it at the time of their passing, meaning your tax-free allowance may grow close to £1M in specific circumstances.

On the other hand, Potentially Exempt Transfers (PET) made in the 7 years prior to death could reduce the Nil Band Rate. These are gifts of unlimited amount, and become exempt from Inheritance Tax if the person gifting the asset survives for more than 7 years after the transfer.

If your estate is liable for Inheritance Tax, the taxable amount must be paid within 6 months from the death, and proof of payment must be submitted to the Probate Registry. Only once the balance is paid a Grant of Representation, or Probate, can be issued.

The value of large estates can make the Inheritance Tax bill a significant expense, even with the additional relief of Residence Nil Rate Band, business and agricultural property relief, and Transferable Nil Rate Band for widows and widowers. If the representative for the estate or family members of the deceased have issues paying for the whole balance within 6 months, they may:

• Apply for a bank loan, using the assets of the estate as security.
• Set up instalments. This can only be done in particular circumstances, and usually involves 10 annual payments beginning 6 months after the death.

The testator can set up an insurance policy while they are still alive to cover the cost of IHT, however this should be done with the support of specialist succession planning advisors.