What is Inheritance Tax?
Inheritance Tax is the tax levied on property, money and possessions acquired by gift or inheritance.
Who pays Inheritance Tax?
The estate of the Deceased will pay the tax.
The executor, or administrator, of the estate, will pay any tax owed using funds from the estate. Payment must be made before the Grant of Probate can be received.
When the deceased is leaving their estate to their spouse, then no tax will be payable.
If you have received a gift from someone who then passes away within seven years of gifting the item to you, you could potentially be liable for tax.
When there is a Trust contained in the Will, then the Trustees will be responsible for paying the tax.
Will the Estate pay Inheritance Tax?
Like most tax situations, there is a tax-free threshold for Inheritance Tax. If the estate is valued as being less than that threshold, then it will not have to pay tax. If the Estate is over the threshold, then it will pay tax on the amount over the threshold only.
As at the time of writing (February 2017) the current threshold is £325,000.
The tax will be due six months after the date of death. If it is not paid within the six-month time frame, then the Revenue will start charging interest.
How much is Inheritance Tax?
At the time of writing Inheritance Tax is 40% on anything over the £325,000 threshold. However, this will be lowered to 36% if 10% of the Estate is left to charity.
Inheritance Tax reliefs
There are various reliefs and exemptions from tax. You will not have to pay any tax, or you will pay reduced tax on the following types of property.
- Business property
- Agricultural property
- Woodland property
- Heritage property
In conclusion, inheritance tax is payable on an estate when its value exceeds £325,000. It is payable at 40% of anything over the £325,000 threshold, and this is paid by the estate. There are types of property that are exempt from tax such as business property and farm property.
If you have any questions about inheritance tax then contact our Louise Bunn on 01603 767671