Inheritance Tax

In most cases, the executor or administrator of the deceased person’s estate is responsible for ensuring that any Inheritance Tax owed is paid. However, beneficiaries may also be liable for paying the tax on certain gifts and trusts.

Nil-Rate Band

The Nil-Rate Band is the threshold below which no Inheritance Tax is due. As mentioned earlier, the current threshold is £325,000. Married couples and civil partners can combine their allowances, effectively doubling the threshold to £650,000.

Residence Nil-Rate Band

An additional allowance called the Residence Nil-Rate Band may apply when a person’s main residence is left to their spouse, civil partner and/or direct descendants, such as children, including step-children, adopted and fostered children. As of 2023, this allowance is £125,000 per person and is subject to certain conditions.

There are ways to minimise the impact of Inheritance Tax. Consider the following:

Gifts

Certain gifts made during a person’s lifetime may be exempt from Inheritance Tax. However, it’s essential to be aware of the rules and timeframes associated with different types of gifts to ensure that the gift achieves your objective and does not lead to an immediate tax liability.

Trusts

Setting up trusts can be a strategic way to manage assets and potentially reduce Inheritance Tax liabilities. Professional advice is recommended when considering trusts, as the rules can be complex.

Inheritance Tax is a complex area, and individual circumstances vary. It’s highly recommended to seek professional advice from one of our Independent Financial Advisers, to ensure that your estate planning is considered holistically alongside your financial planning, to align with your specific needs and goals.