In executry law, one of the main issues that an appointed executor has to contend with would be the payment of UK inheritance tax. What is an inheritance tax? Why is there a legal obligation to pay it? Who should pay for it? Am I entitled to compensation if I paid for the tax with my own money. How much is this tax and how is it computed?
There are hundreds of different questions that arise when it comes to UK inheritance tax, so sit back and read on because we have compiled a list of some of the most common questions and answers that an ordinary individual may have about this particular tax.
How Do I Calculate My IHT (UK Inheritance Tax)?
Fortunately, there is an easy solution to this particular question. Simply look it up online and you will see quite a few different online inheritance tax calculators. The results that you get from these calculators should be accurate as long as you put in all the correct information.
How Much Is The UK inheritance Tax?
The standard inheritance tax is 40%, but it is only charged upon the estate of the deceased that is above the tax-free threshold. So for example, if the valuation of your entire estate is £500,000 then the current tax-free threshold under UK executry law is £325,000, then this means that the part of your estate that is above the threshold is £175,000. This is where the 40% inheritance tax will be taken from – so it would be 40% of £175,000. Of course, do take note that there are other variables to factor in, but this example should give you a barebones idea of how inheritance tax works.
Is There A Way To Reduce My IHT?
Although the inheritance tax is not really something that you should be worried about as to your own estate because it is only charged upon your death, if you want to lessen the burden upon your family in order to ensure that they receive the full benefits of your estate, then there are several ways that you can achieve this.
Give To Charity
If you specify in your will that more than 10% of your estate should be given to a specific charitable cause, then the inheritance tax enjoys a 36% reduction. This might seem like a small value at 4%, but it scales up depending on how large your estate is. Also, there are other ways.
Having A Spouse Or Civil Partner
This is the most straightforward way to avoid the UK Inheritance Tax Completely. If you have a spouse or a civil partner who is still living and not legally incapacitated at the time of your death, then your partner will inherit your entire estate without having to pay the inheritance tax. Also, your partner will receive the benefits of the entire portion of your IHT allowance. This means that when your partner dies, he/she can leave behind £650,000 as the tax-free portion of the estate.
Other Methods IN UK Inheritance Tax
Giving away a large portion of your property is also another way you can avoid the inheritance tax – of course, a portion of the IHT may still be due unless you died only after more than 7 years after gifting the property that you wish to be free of the UK Inheritance Tax.
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