Know your Inheritance Tax rates with Principle First
Inheritance Tax is one of the areas where good financial advice can very quickly make a huge difference. Understanding Inheritance Tax rates is the first step towards good inheritance planning and avoiding Inheritance Tax.
Inheritance Tax is generally levied on eligible assets at a standard rate of 40%. You can calculate how much of your wealth could be liable for Inheritance Tax using our online Inheritance Tax calculator.
However, there are exceptions to the norm, which we also explain to clients when giving them Inheritance Tax advice.
Would you like to know more about Inheritance Tax rates? Make an online financial advice enquiry or ring 0800 678 5929 now
When are Inheritance Tax rates less than 40%
When using Potentially Exempt Transfers or PETs in Inheritance Tax planning, assets gifted to your children become tax-free only once you have survived for 7 years after the gifting. This is known as the 7-year rule. However, Inheritance Tax tapers down during the course of the 7 years, rather than remaining at the full 40% until the 8th year begins.
The tapering down process works as follows. If the person died between 3 & 7 years of making the gift you can apply what’s know as ‘Taper Relief’, to the amount of IHT due, to reduce the amount payable:
Taper Relief percentage applied to the tax due:
20% – 3 to 4 years
40% – 4 to 5 years
60% – 5 to 6 years
80% – 6 to 7 years
The asset is then declared free of Inheritance Tax in the 8th year after the gifting.
Your Inheritance Tax Threshold
Another key step in understanding how Inheritance Tax could apply to your wealth is understanding the Inheritance Tax threshold, which is the point at which IHT rates may be applied to the value of your estate. The IHT threshold is also known as your personal allowance, or the Inheritance Tax nil rate band, and this stands at £325,000 for a single and £650,000 for a couple.
There are many ways of reducing or completely eliminating an Inheritance Tax liability. At Principle First, our Inheritance Tax team are standing by – just a short discussion with one of our experts can literally save you thousands!
Contact Principle First today for advice on Inheritance Tax rates – make an online financial advice enquiry or ring 0800 678 5929 now
