In our last article, we discussed how some people never actually get around to organising their financial affairs in the event of their death.
However, if you want to leave as much wealth as possible for those you love, substantial sums can be saved from Inheritance Tax by taking some relatively simple actions now.
One new area that came into effect this year is the Residential Nil Rate Band (RNRB) that allows an additional threshold to come in to effect before any Inheritance Tax becomes due.
If someone dies after 6 April 2017 and their estate is above the basic Inheritance Tax threshold of £325,000, the estate may be entitled to an additional £100,000 free of Inheritance Tax if the person meets the qualifying conditions.
These include that the residential property must have been the deceased’s main residence at some point and there can be only one main residence. The residence must also be left to direct descendants only (children) or their lineal descendants (e.g. grandchildren).
The maximum available amount will go up yearly. For deaths in the following tax years it will be £125,000 in 2018-2019, £150,000 in 2019-2020 and £175,000 in 2020-2021. For later years, the threshold will go up in line with inflation based on the Consumer Prices Index.
On top of that, the additional threshold will gradually reduce, or taper away for an estate worth more than £2 million, even if a home is left to direct descendants. The additional threshold will reduce by £1 for every £2 that the estate is worth more than the £2 million taper threshold.
It is also possible to put some of your assets into a trust. This can change the way HMRC treats your estate, particularly if the home is held in a trust before a person dies or transferred to a trust when they die.
If this sounds a little complicated, it might well be worth getting some independent advice. Our estate planning experts are available now if you would like to discuss how we can help you. Call us on 01243 532161 or email email@example.com.