Inheritance tax understanding
Discussion
Can someone more familiar than I please check my understanding of the current inheritance tax rules:
Theoretical scenario:
Married Parents
Parent #1 passes away (in 1996 if that matters)
All assets of parent 1 pass to remaining parent and is exempt from inheritance tax.
When parent 2 passes (at current rates) they will have their own an inheritance tax limit of 325K plus an additional limit of 325K for parent #1, giving a total inheritance tax threshold of 650K
Any estate value OVER the 650K will incur inheritance tax at 40% e.g. a 700K estate will incur an inheritance tax bill of 20K (40% of 50K)
Do I have that correct ?
Thanks,
Theoretical scenario:
Married Parents
Parent #1 passes away (in 1996 if that matters)
All assets of parent 1 pass to remaining parent and is exempt from inheritance tax.
When parent 2 passes (at current rates) they will have their own an inheritance tax limit of 325K plus an additional limit of 325K for parent #1, giving a total inheritance tax threshold of 650K
Any estate value OVER the 650K will incur inheritance tax at 40% e.g. a 700K estate will incur an inheritance tax bill of 20K (40% of 50K)
Do I have that correct ?
Thanks,
Eric Mc said:
The Seven year rule has been around for many years so has nothing to do with Gordon Brown.
Didn't he give us the transferable IHT allowance? Don't forget he also prolonged the life of the Thames barrier by reducing the weight of SE England by 400 tons* when he sold most of our gold reserves... for 2bn - reserves which would have been worth 5-6 times that had we kept them. [*assuming that the gold left the country, rather than staying in the BOE vaults with a sign saying "China" or "Blackrock" on it].
GB's biggest sleight of hand was to take away pension dividend tax credit, with appalling compound effects on people with DC pensions.
Anyway, back to the thread; as EMc could give expert commentary on there are also special rules for IHT to do with farms and their machinery, working forestry, and some businesses as well as some trusts but those may not apply to the OP's case.
Eric Mc said:
Simpo Two said:
Yes. It is the only good thing Gordon Brown did (presumably by accident).
The Seven year rule has been around for many years so has nothing to do with Gordon Brown.
Siscar said:
Above 650 it depends on who that is left to, charities and political parties being the main exemptions. So it is possible to leave 650k to family and friends, 1million (or whatever) to you favourite charities and pay no IHT.
Great points. Although it's probably picking at fine detail, from April 2012 the law changed slightly. If you bequeath more than 10% of your estate to charity, anything left over the nil rate band is taxed, but at 36 and not 40%.If though, when you die, you havent left assets to a qualifying charity or if the donation in your will doesn't pass the 10% test when you depart this mortal coil, your beneficiaries can arrange an 'Instrument of Variation' to make or increase a donation to charity.
Imagine the fun to be had, telling frail old gramps you'll donate something on his behalf to something you know he hates. If you apply for the Instrument, it means that you get less, but so too does The Treasury - and an approved charity benefits. Which is nice.
If you want to leave a gift to a political party (not all apply), then be careful how you compose your will. The sight of ConLib hoovering up an old lady's estate and then having to return it wasn't last year's most edifying moment.
http://www.thetimes.co.uk/tto/news/politics/articl...
Finally, if you own something of determinable national historic or scientific interest, it *could* be exempt from Inheritance Tax, but the asset has to be made available for the public to view.
Notwithstanding that, this is where you get to find what's been excluded from IHT, thereby allowing you access.
http://www.hmrc.gov.uk/heritage/lbsearch.htm
IHT is fascinating (honestly). More and more of my work is coming from it now. Woodland and Agricultural legislation has changed; it's always worth taking specialist advice to check that a will remains valid and is worded correctly.
Indeed, would you believe there are 88 (88) reliefs available to mitigate IHT alone?
The Office of Tax Simplification identified (in 2011) that 1,042 tax reliefs existed in the UK. It reviewed 155 of them and recommended that 47 should be abolished either because they had expired, there was no longer a policy rationale, the value was negligible or the admin burden outweighed the benefit.
Parliament went one better and did it did in fact, abolish 48 reliefs. But since then, it has introduced 134 new ones. As of December last year, the total number of reliefs stood at 1,128. In other words, more than when we started..
The Office of Tax Simplification identified (in 2011) that 1,042 tax reliefs existed in the UK. It reviewed 155 of them and recommended that 47 should be abolished either because they had expired, there was no longer a policy rationale, the value was negligible or the admin burden outweighed the benefit.
Parliament went one better and did it did in fact, abolish 48 reliefs. But since then, it has introduced 134 new ones. As of December last year, the total number of reliefs stood at 1,128. In other words, more than when we started..
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