This month we are focusing on: Inheritance and Property Tax
And this week are looking at: What Is Inheritance Tax?
Inheritance tax is the tax paid on assets (after inheritance tax allowances are deducted) left when someone dies. As Benjamin Franklin said, the only things certain in life are death and taxes, and inheritance tax (IHT) touches you on both.
When you die, the Government assesses how much the assets of your estate is worth, then deducts your debts from this to give the value of your estate. Your assets include:
- Cash in the bank
- Any property or business you own
- Any proceeds from life insurance policies
But how much tax will you pay:
It is not you, but your estate that will owe tax over a set threshold when you die (a smaller percentage can be paid when you leave a set % to a charity) – excluding your ‘main residence’ allowance which came in in 2017/2018 tax year.
The allowance is only valid on your main residence and where the recipient of a home is a direct descendant (classed as children, step-children and grandchildren).
For couples, when the first one dies their allowance is passed to the survivor thus doubling the threshold before tax is due.
If you know anyone that needs help and advice on Inheritance Tax please ask them to contact Avanti.