Inheritance Tax – What is your Current Allowance?
Published Date: 6th June 2019
What is your Current Allowance?
When you die, the Government assesses how much your estate is worth, then deducts your debts from this to give the value of your estate. The BIG question is, of course, how much tax DO you pay?
The current inheritance tax (IHT) allowance whereby no inheritance tax is charged is on the first £325,000 (per person) of someone’s estate – which is the value of the total assets they leave behind when they die (or 36% if leaving at least 10% to a charity). Couples can leave a home worth £650,000 without it attracting inheritance tax (singles £325,000). Above the threshold, the charge is 40%. This remains unchanged.
A person’s estate can include:
• Any monetary assets
• Any property or business they own
• Pay-outs from life insurance policies
• Unexpired lifetime gifts
What has changed is the introduction of a new residence nil-rate band (RNRB). This applies to individuals with a Will who have an estate (including a main residence) that exceeds the inheritance tax threshold of £325,000 for 2019/20 which they are leaving to their direct descendants (including adopted, foster and step-children). This means they will gain an additional threshold before IHT becomes due on their estate. This is a further:
– £150,000 in 2019/20
– £175,000 in 2020/21
The amount is added on to the standard nil-rate band; for instance, in 2019/20, the inheritance tax threshold will be £475,000 (325,000 + £150,000), but it will only apply up to the value of the property. Note: the RNRB is limited to one residential property. The RNRB will be subject to a tapered withdrawal of 50% if an estate is worth more than £2 million.
Note: People in certain ‘risky’ roles are exempt from paying inheritance tax if they die in active service or if a person who was injured on active service has their death hastened by the injury, even if they’re no longer on active service. Included in this are armed forces personnel, police, firefighters and paramedics, plus humanitarian aid workers.
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TOPICS: Business Bounce Back Loans Property Taxes - April 2020 changes landlords need to be aware of Educate the Executor Other Covid-19 Daily Updates:Practice Number: 21331Jacqueline Tetley is licensed and regulated by AAT under licence number 5096.