Main Residence Allowance – in 2020/2021 this has risen by £175,000 which for some Individuals means that no tax is charged on the first £500,000 but this rule is only applicable if the estate is worth less than £2.4 million.
Basic Nil Band Rate – currently that basic nil band rate is fixed to £325,000 until April 2021.
Inheritance tax is charged on the property and assets of a deceased individual based on a flat rate of 40% excess than the nil band rate which for 2021 is above the threshold of £325,000. The threshold of £325,000 changes to £500,000 if the transfer is made to family relatives such as children. Even if the inheritance tax sums up to below £325,000, it still needs to be disclosed to HMRC.
A chargeable lifetime transfer is a gift made by the individual to a trust, making it immediately taxable, and the amount of tax that results depends on whether the lifetime tax is paid by the donor or the trust. If the tax is paid by the donor, 25% is charged and 20% is charged if tax is paid by the trust.
Overall, Inheritance Tax entails complicity but this blog is a form of understanding the principles behind inheritance tax to form the basis of planning with the aim to reduce the tax liability for the beneficiaries. For further assistance or enquires, call us on +44 (0)1213681277 or alternatively email info@taxcare.org.uk.