Those of us who achieve any degree of success will have paid our fair share of tax during our lifetime, so a tax on our estate when we die can add insult to injury.
The UK has one of the highest rates of Inheritance Tax in the world.
Originally known as ‘Death Duty’ in 1894, Inheritance Tax is a tax paid on one’s estate when we die but is sometimes payable on trusts, or gifts made during our lifetime.
Inheritance tax is 40 per cent of the value of one’s estate over the threshold, individually £325,000 or up to £650,000 for a married couple (including civil partnership) 2019-20, or 36 per cent if the estate qualifies for a reduced rate as a result of a charitable donation.(/p>
The introduction of the Residence Allowance in April 2017, which will stand at an additional £175,000 per person at 6th April 2020, means that for a couple (including civil partners) they will be able to leave a total of £1million including their main residence, free from Inheritance Tax.
However, the rules are complicated and advice should be obtained. There are a number of exemptions and financial planning methods that can legitimately reduce or even mitigate entirely your beneficiaries inheritance tax liability, saving literally thousands or hundreds of thousands of pounds.
HMRC has seen a huge growth in tax receipts from this source, reaching over £5.2billion in 2017-18. It's no longer the very rich who are affected either. With property values as they are today, it's easy to end up suffering Inheritance Tax and that means less money for your beneficiaries if you do nothing about it.