We’ve all heard of inheritance tax. But do you understand how it works?
There are ways of mitigating against it, and here at Banner Jones Wealth Management we can help you do that.
Just think about it. You have worked hard all your life, stored up a nice nest-egg and own a nice home. When you die, who do you want it to go to? Your loved ones? Or the taxman?
It’s easy to assume that it will all work out as you have planned, but without keeping your will up to date and constantly reviewing changes in the law, it could be the taxman who gets more than you would like.
Inheritance Tax (IHT) is a tax on the value of your estate on your death amounting to 40 per cent on anything above your nil rate band threshold. This nil rate band is currently £325,000 for an individual, and has not increased since 2010, and there are currently no plans for this amount to go up.
That means for an individual if you leave behind an estate worth £500,000, the tax bill will be £70,000 - that’s 40 per cent of £175,000 – the difference between £500,000 and £325,000. If you are married or in a civil partnership, it is possible for the used allowances to be combined within a will; so the surviving partner can benefit from an allowance of £650,000.
While it’s complex, and not granted in all cases, there is also the residential property nil rate band (RNRB). The RNRB started in April 2017 at £100,000 and increases each year by £25,000 until it reaches £175,000 in April 2020. When added to the standard IHT nil rate band, the RNRB will potentially allow individuals to pass on a total of £500,000 before IHT tax-free.
So you see, IHT is complex!
At Banner Jones Wealth Management, we believe you should be able to pass on as much of your wealth as possible. Through careful planning, sometimes over a long period of time, we can create a plan for you which includes ways to mitigate and/or eliminate the tax burden payable by your heirs on your estate.