Inheritance Tax is charged at 40% on all sums in your estate over the value of the threshold, currently £325,000. Many estates will not reach this threshold and so no tax will be payable. However, if your estate value is over the threshold then tax may be payable, but there are a number of exemptions, reliefs and allowances which can be used if they are correctly calculated and claimed at the time of submitting the relevant forms to HMRC.
The main allowance is the nil rate band, which is the threshold of the first £325,000 of your estate on which no tax is payable. This nil rate band can usually be transferred from one person to their spouse, meaning an estate can be valued up to £650,000 before any tax is payable.
Another allowance is the residential nil rate band, which is currently £175,000, and is applied to the main residence of the person who has died, but only if their main residence is being left to a spouse or children.
In all estates where probate is being sought, the relevant forms will need to be submitted to HMRC with the calculations of these allowances and reliefs applied correctly, along with the numerous other available reliefs, if you wish to reduce the amount of tax the estate pays.
Our probate team will do all of the necessary calculations and complete the forms as part of our probate service. It is important to understand that these forms are required even if there is no tax payable.
There are planning opportunities open to you, which we can discuss at the time of meeting, which will mean your estate has suitable planning in place to mitigate our estate’s potential tax liability.