7 Things To Know About Inheritance Tax
As Benjamin Franklin once famously declared, ‘in this world, nothing can be said to be certain, except death and taxes’. If there’s one thing in the world that perfectly embodies Franklin’s statement, that is the inheritance tax. Formally speaking, inheritance tax is an impost on the estate of someone who has died. Under UK law, the definition of ‘estate’ comprises – with a few notable exceptions – is all the property, money and possessions of the diseased.
Lately, inheritance tax has become newsworthy: like many other developed nations, the UK faces a growing aging population, a fact that amongst multiple consequences has a direct impact on the collection of inheritance taxes. For instance, in 2016 the government expects to take over £4 billion from more than 40,000 estates that are due to pay the bill, which means that the average inheritance tax bill is slightly above £100,000 per recipient (which, as a general rule, aren’t too happy about this). In addition, there are more interesting facts about this tax that might be of your interest:
- Inheritance Tax is charged 40% on every estate above the £325,000 threshold.
- If you’re married (or in a civil partnership) and your estate is worth less than £325,000, you can transfer any unused threshold to your partner when you die. This means their threshold can be as much as £650,000.
- Money, property and possessions (all the estate) must be valued – if possible, by a professional. After it gets valued, you can get a ‘grant of representation’, which is the legal right to deal with the estate. This is important because in terms of legitimization.
- You have one year from the date of death to fill in Inheritance Tax forms if there’s Inheritance Tax to pay. Under uncertain economic circumstances, there’s room for speculation – a falling pound can, in occasion, act as a taxpayer’s friend.
- You can change a will to reduce the amount of Inheritance tax to be paid. You have two years from the will maker’s death to do so, and must meet some important requirements.
- Farmers with benefits: some agricultural property is free of Inheritance Tax, including land or pasture that is used for intensive farming, stud-breeding farms, short-rotation forestry, the value of the milk quota associated with the land, some agricultural shares and securities, farm buildings, cottages and farmhouses. Not a bad deal at all.
- There’s also a tax relief for national heritage assets, a category that includes many types of estate: from historical objects and buildings to ‘land of outstanding natural beauty and spectacular views’. To avoid taxation, the new owner must make an agreement to look after the item, make it available for the general public to view and to keep it in the UK.
Curiosities aside, you’ll find a comprehensive guide on inheritance tax here.