Inheritance tax information
It is important to understand the implications of Inheritance Tax and how to most effectively make simple provisions in your will to reduce this tax.
How can I minimise how much tax I pay?
The Chancellor’s March 2011 Budget announced that for deaths on or after 6 April 2012, it is proposed that individuals who include charitable legacies in their will of at least 10% of their net taxable estate will benefit from a 36% rate of Inheritance Tax (IHT), a 10% reduction from the usual IHT rate of 40%.
The purpose of this relief is to incentivise giving generally. It should be of particular interest to potential benefactors who are already considering leaving legacies and who may find under the proposed relief that they can leave more to charity without taking away from the amount left to their non-charitable beneficiaries.
HM Revenue and Customs (HMRC) held a consultation on the proposal which PDSA contributed to. This consultation closed on 31 August 2011 and the draft legislation for further consultation is expected in December.
By making simple provisions in your will the amount of Inheritance Tax payable can be significantly reduced.
Although an unused allowance can be transferred to a surviving spouse or civil partner, it is important to have an up-to-date will.
Donations to a favourite charity in your will are tax-free and easy to arrange.
It is important to look at your own circumstances and seek advice.
Who has to pay Inheritance Tax?
Inheritance Tax used to be something only ‘wealthy’ people needed to consider, but this is no longer the case.
You may be aware that the Government announced in this year’s budget, a reduced rate of inheritance tax (IHT) will apply where 10% or more of a deceased's net estate (after deducting IHT exemptions, reliefs and the nil rate band) is left to charity. This would mean that the current 40% rate will be reduced to 36%. The new rate will apply where death occurs on or after 6 April 2012. Our information guide has not yet been updated to reflect this change, as the government is currently consulting on the detailed implementation of this proposal and we will learn more by the summer.
Understand the implications of Inheritance tax
The Inheritance tax booklet provides a basic understanding and introduces some of the ways you can manage a liability to this tax.
How much Inheritance Tax will I need to pay?
The level at which Inheritance Tax starts is currently £325,000. If the value of your estate (what you own when you die) is above this amount, your estate is liable to Inheritance Tax at 40%.
PDSA’s easy-to-use Inheritance Tax calculator will allow you to see if your estate would be liable to pay Inheritance Tax.
Inheritance Tax Calculator
PDSA's IHT calculator is intended as a guide, independent advice should be sought as individual circumstances will impact on the amount of Inheritance Tax due.
What happens if you die without making a will?
Visit our intestacy chart for more information.
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