If a loved one dies, issues such as inheritances and taxes can seem of peripheral importance. They can be very important in the long run, however, to help you and your family and so it is a good idea to know a little about the subject even before anything terrible has happened.
What is inheritance tax?
Experts using software for financial advisors can undoubtedly help you unravel the intricacies of inheritance tax but, at the very least, you need to know what it is. In short, it is the tax that might have to be paid to HM Revenue and Customs (HMRC) based on the value of the deceased person’s estate.
The amount payable to HMRC is only based on the amount above a certain level. To find out what the current level is, look at the inheritance tax section of the government website at https://www.gov.uk/inheritance-tax.
A financial advisor using software such as that provided by https://www.intelliflo.com/financial-adviser-software can help with dealing with finances after a person’s death but basic knowledge can go a long way. This includes knowing that if the value of an estate is below the set threshold – including possessions, money and property – then there will be no inheritance tax to pay.
When do you have to pay inheritance tax?
Whatever the estate value, the death of a person should be reported to HM Revenue and Customs. This applies even if there is no inheritance tax to pay because the estate is valued at being below the set threshold. It is also worth noting that inheritance tax is normally not payable if a person leaves everything above the set threshold to a charity, community amateur sporting club, a civil partner or to a spouse.
At the time of writing, if inheritance tax does apply, the rate was 40 per cent. This is charged on the proportion of the deceased person’s estate that is above the stipulated tax threshold. Even in this case, there are times when the amount payable can be reduced.
Reductions in inheritance tax
The amount of inheritance tax payable may be reduced if someone leaves a proportion of their estate to charity or if property is passed on to close relatives when the threshold can be increased, depending on the overall value of the estate.