ONE MILLION POUNDS.
That’s how much your estate can now be worth before Inheritance Tax will be charged on your death. Ish. If you’ve got the right assets, the right family and the right plans in place.
This is a minefield!
What we want are nil rate bands. These refer to the level of assets we’re allowed to have before our beneficiaries start paying Inheritance Tax at 40% when we die.
Each of us has a nil rate band of £325,000. Some of us also have a residence nil rate band too. On 6 April 2020, the residence nil rate band increased to £175,000 per person, from its initial starting point of £100,000. The residence nil rate band is an inheritance tax relief which applies to the value of your home, provided your estate meets certain conditions:
- You own your own home AND
- You will leave it to your children or grandchildren* AND
- Your estate is worth less than £2,000,000 before reliefs are applied
*Adopted and stepchildren qualify, too.
This sounds simple, however:
- This generous £1,000,000 is actually doubled up, it assumes you’re married and is your total joint nil rate bands. If not, you can half this figure*
- If your estate is over £2,000,000, you might be entitled to some of the residence nil rate band- it tapers away gradually
- If your home is worth less than the residence nil rate bands, you won’t get the full relief. Reasonably likely up here in the North East
* Unless you have been married previously and your spouse passed away leaving their nil rate bands available.
So, what do you need to do? Simply, GET SOME ADVICE. Speak to a professional. It’s vital that you’ve got your legal affairs in order to make sure that you benefit from all of the reliefs and allowances available. This starts with having up to date wills. We don’t do wills, but we know fantastic people who do. Once the structure is right, it’s just a case of fine-tuning your arrangements to ensure everything is invested and taken care of as it should be.
If you want to get your head around the minefield that is estate planning, please get in touch and we’ll happily help.