The Question
What is inheritance tax and how will this affect me?
Andrew’s Answer
Inheritance Tax is a tax charged on wealth that is passed to other people as a gift. Most typically, this arises when someone dies and inheritance tax is charged on their assets (most commonly at 40%) before they may be inherited.
It is a complex tax with lots of rules, reliefs and exemptions but has been in place in one form or another since 1694. Historically, this was a tax that affected fewer people but, with the effect of fiscal drag (freezing of thresholds whilst inflation has increased the values), more and more people are finding that inheritance tax is charged on their estates.
Inheritance Tax is particularly complex to manage with unmarried couples who own property together as it can cause a considerable issue on each death.
If inheritance tax were to be abolished, putting the UK in the same position as only a few other countries (such as Hong Kong and Australia) where no such tax exists, the position would become simpler for many people.
It seems unlikely, however, that it would not be replaced with something else that is capable of providing the government with at least as much return as Inheritance Tax but it could be simpler and affect wealthier individuals.
Until you know that the tax will not apply to you, it may
When buying a home it’s really helpful to understand the rules around inheritance tax as it can impact your family in the future. Andrew Titmus responds to a reader’s question asking for more clarity around the matter
be helpful to get some robust Estate Planning advice to ensure that you have managed its effect on your potential beneficiaries.
Andrew Titmus, is partner, head of estate planning and private client solicitor at Parfitt Cresswell
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