Gain a clearer understanding of inheritance tax (IHT) and its potential implications on your estate. Discover the basics of IHT, current thresholds, and effective strategies which aim to minimise tax liabilities, helping to ensure that your loved ones are well taken care of.
Inheritance tax (IHT) can seem like a daunting topic but breaking it down into manageable parts can make it easier to understand. By the end of this article, you'll have a clear grasp of what inheritance tax is, how it operates, the current thresholds, and strategies which aim to minimise its impact on your estate.
Inheritance tax, often referred to as IHT, is a levy on the estate of a deceased person. This includes their money, property, and possessions. It's important to note that this tax is paid by the estate itself before the assets are distributed to the beneficiaries.
The amount of inheritance tax payable depends on the value of the estate and the relationship of the beneficiaries to the deceased. Generally, assets passed to spouses and civil partners living in the UK are exempt from inheritance tax.
In the UK, there is a threshold known as the 'nil-rate band'. As of 2024, this threshold is £325,000. There is also a residence nil-rate band, currently £175,000. This means that if the total value of each person’s estate, including a home, is below £500,000, no inheritance tax is due. As a couple this means up to £1m can be passed on tax-free to your beneficiaries. However, any amount above this threshold may be taxed at 40%.
There are several strategies to consider for minimising inheritance tax liabilities:
Inheritance tax can be a complex area, but with careful planning, you can help ensure that your loved ones are well taken care of and that you do not pay more IHT than necessary. At SPW, we offer personalised advice that considers your current and future needs and liabilities. We can support you in understanding your potential IHT liabilities and the options you have to address them.
We can begin with a free, no obligation conversation to understand if our service is right for you. There are no hidden fees or charges, and you’ll only pay if you choose to go ahead with the recommendations in your personalised financial plan.
By taking the time to understand inheritance tax and planning accordingly, you can make informed decisions that benefit both you and your beneficiaries. If you have any questions or need further assistance, don't hesitate to reach out to a financial adviser.
This article is for information purposes only. It is not intended as advice.
Tax treatment depends on the individual circumstances of each client and may be subject to change in the future.
