Inheritance Tax

[oraclesmith]

it may be the same case however from my understanding the tax exposure is 40% of £400k ... there is no allowance. If the sum of the assets is over the 285k mark then the tax must be paid on the whole amount.
So if your assets are £285000.01 then you pay £285000.01 * 0.4

inheritance law is dum and the people it was set up to catch have clevere exit plans in place anyway..

Er,no. Try this :-

http://www.taxcentral.co.uk/taxcentr...or/default.asp

[Mr Crosby]

Marry your mother.

[ASB]

If you have a spouse, then they inherit your estate free of inheritance tax as I understand it.

Yes but it's not really as simple as that.

Say you have an estate of 1mln. Leave the lot to the spouse, no IHT. Traditionally spouse won't have two long to go, so they croak and leave the lot to kids or similar. IHT due on 1m - 285k = 715k.

Now, if instead of doing the above you had left the spouse 285k and given the rest to the kids then IHT is only ever paid on 1mln - 285k (your allowance) - 285k (spouse allowance) = 430k. So by leaving everything to a spouse no IHT is payable at that point but a potential extra 70k is payable on their death. [Basically if you can take 285k out of your eastate on death to leave to someone other than your spouse you should, otherwise the allowance is lost forever].

Some things that should be done are to own property as joint tenants not tenants in common, ensure direct beneficiary of life policys etc to someone other than yourself (so they are never part of your estate). Life interest trusts, interests in possession and certain other trusts can also be benerficial.

Trusts created by wills on death have taken a bit of a knock and more care needs to be taken over their creation.
http://www.taxationweb.co.uk/capital...cle.php?id=335

[kramer]

Er,no. Try this :-

http://www.taxcentral.co.uk/taxcentr...or/default.asp

I stand corrected

http://www.hmrc.gov.uk/leaflets/iht3.htm

I must have been only half listening to the radio when the guy was explaining it.

[AtW]

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[ASB]

Ah, but that's the hidden kicker with IHT. You're not allowed to dispose of the estate or portions thereof to pay the tax.

That is in the process of changing.

[oraclesmith]

No need to get excited AtW, kramer got it wrong. There is a £285k nil rate band, like a tax allowance.

The misunderstandings are mainly due to media hype because when they say a third of people are 'caught by inheritance tax' to make attention-grabbing headlines, what they really mean is that this many people have property and/or other assets worth over £285k. It doesn't mean that all these people will end up paying thousands in tax because that third is reduced by (a) people who have spouses which will inherit everything free of tax and (b) people who have a little over £285k, who will end up paying a tiny bit of tax (c) people who make arrangements to distribute their assets well before they get old and (d) those who will have to dispose of these assets to pay for care in their old age.

Thus if you have £286k in estate and you die, your inheritors will pay about £400 in tax.

[AtW]

That is in the process of changing.

Would not exactly make people happy of having to sell the house of their parents. The amount of tax from inheritance is probably like extra pence or two on fuel duty - I'd rather seen increase there.

[DimPrawn]

I did the calc and my IHT would be around £170K. A lot of money to give GB, even compared to IR35, and yet this tax applies to everyone.

It's not just old age that kills you remember. You and the wife could die tomorrow in a car crash, plane crash, Muslim bombing, bird flu, freak bungy jump accident, who knows and that tax is due the moment you croak.

Your kids have to pay it!

Vote Labour. You know it makes sense.

[Lucifer Box]

That is in the process of changing.

I'm sure there's no great haste attached to that change.