Death and Duties (UK)

Inheritance Tax

This is a tax on your estate (your assets including properties, savings minus your debts).

The threshold ie nil rate band is currently £325,000. This means your estate value up to this amount is tax-free.

If your estate is worth more than this, any amount over £325,000 is charged 40% and this is payable to HMRC.

If your estate includes property, there is an additional tax-free amount of £175,000 if the property goes to the children or grandchildren. So, this gives a total tax-free amount of £500,000 for one person or £1m for a couple.

NOTE: Gifts given out during your lifetime may be clawed back by HMRC if you die within 7 years of giving it. So, recipients better pray hard that you stay alive. Gifting whilst alive is still worth doing because the rate starts dropping after 3 years of the gift date.

So, what are the best ways of gifting tax-free?

  • You can give regularly towards someone’s living cost but the money must come from your disposable income. It must not affect your standard of living.
  • You can give your child up to £5000 as a wedding gift or up to £2,500 to a grandchild or up to £1000 to any person.
  • You can give your spouse or civil partner any amount as long as they live in the UK.
  • You can give a small gift of up to £250.
  • Remember that we all have an annual gifting exemption of £3000.

About Phoenix

Accountant | Tax Specialist | Dreamy Entrepreneur | Blogger


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