Inheritance Tax is a tax on the estate (the property, money and possessions) of someone who's died.
Inheritance Tax can be seen as voluntary - that is to say, it may be avoided if the appropriate planning is put in place during life.
Whereas if you don't put the appropriate planning in place and your estate is subject to Inheritance Tax, your estate will automatically be taxable at the prevailing rate.
Inheritance Tax isn't charged on gifts to Spouses, Civil Partners, Charities and Amateur Sports Clubs as well as assets that qualify for Business Property Relief.
Each of us have Nil Rate Band and Residential Nil Rate Band tax-free allowances that can be applied subject to these being specifically available to you at the time of death with anything in excess being taxed at 40%.
In other words, where tax relief isn't available, for every £100,000 you are over your threshold you will pay £40,000 of inheritance tax which will significantly reduce your beneficiaries' inheritance.
To highlight this point, having drafted Wills for tens of thousands of clients, when discussing their preferred beneficiaries, to date, none have said HMRC.
The nil rate band (at £325,000) and the residential nil rate band (at £175,000) have both been frozen until at least April 2026 and so with estate increasing year on year, more estates will suffer more inheritance tax but there are ways to mitigate or deal with Inheritance Tax during life or on death. Everyone's circumstances are different and at Pattison James Associates, we specialise in highlighting to you any Inheritance Tax applicable and possible avenues to mitigate against this.
Even if your estate is not currently over your personal allowances that isn't to say it wouldn't be at the time of death. Your assets may grow, you may receive inheritance from loved ones and are only one badly drawn up life insurance policy away from giving yourself an inheritance tax issue.
To avoid unnecessarily paying Inheritance Tax book your Will writing appointment online now or contact us to discuss your estate in more detail.