Inheritance Tax (IHT) is a tax paid on the estate of someone who has passed away, and it’s an important factor in estate planning for families across the UK. With the government’s upcoming Autumn Budget announcement, there is growing speculation that changes could be on the horizon. It is important to understand the current rules and prepare for any updates. The changes may not always be favourable, but PLS is here if you do decide to purchase a property.
Explore how inheritance tax works in the UK, what changes the government could announce, and how you can plan ahead.
What Is Inheritance Tax?
Inheritance Tax is a tax on the estate (the property, money, and possessions) of someone who has died. The government charges 40% on the portion of an estate that exceeds the tax-free threshold. This is known as the nil-rate band and is currently set at £325,000. There is no inheritance tax to pay on estates below this amount.
In certain cases, individuals can benefit from additional reliefs:
- Residence Nil-Rate Band (RNRB): An additional £175,000 tax-free allowance is available when passing on the family home to direct descendants, such as children or grandchildren.
- Spousal Transfers: There is no inheritance tax to pay when assets are transferred to a spouse or civil partner, and any unused tax-free allowance can be passed on to the surviving spouse.
These allowances can reduce the amount of inheritance tax payable on an estate. However, any portion of the estate exceeding the threshold will be taxed at 40%.
Possible Changes in the 2024 Autumn Budget could encourage more people to reconsider their tax planning strategies, particularly those who currently fall below the inheritance tax threshold. Families may need to take a more proactive approach in organising their assets.
Effective tax planning can help reduce your inheritance tax liability. This ensures that more of your estate is passed on to your loved ones.
Why Choosing the Right Conveyancer Matters
If you find yourself in the position of inheriting money and are considering purchasing a property PLS will guide you through the conveyancing process. Our expert team is here to make your property transaction as smooth and stress-free as possible. Contact us today to discuss how we can help you with your property purchase.
By partnering with our award-winning conveyancing team, you can rest assured that your estate is in safe hands. We will work with you to secure your family’s future.