Inheritance Tax
(IHT, a voluntary tax - you or your parents)
The Inheritance Tax threshold is currently £325,000 per individual.
The excess over £325,000 is taxed at 40% and must be paid to allow probate to be settled.
In excess £325,000 transfers on or within 7 years of death.
0–3 years, 100% of the value of the gift taxed at 40%
3-4 years, 80% of the value of the gift taxed at 40%
4-5 years, 60% of the value of the gift taxed at 40%
6-7 years, 20% of the value of the gift taxed at 40%
There is currently no inheritance tax paid on gifts between spouses.
Gifts that are currently exempt of inheritance tax are as follows:
- Gifts to spouses
- Annual allowance of £3000
- Small gifts of £250
- Normal expenditure out of income
- Gifts to Charities
- Gifts in consideration of marriage (£5000 by a parent or, £2500 by a grandparent)
“Tenants in common” is the ideal way to hold property owned by spouses. This allows each spouse to gift their half, or an amount up to the IHT threshold, away in a will.
A Whole of life policy, held in trust can be a way of providing funds for the beneficiaries as a tax free lump sum is paid on death.
Investments can be held in trusts in order to place any growth outside of the estate and yet provide income.
