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Frequently Asked Questions

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InHouse Wills & Probate

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Inheritance Tax

Inheritance Tax (IHT) used to be quite straightforward, but constant tinkering by successive governments has made it ever more complicated. Here is an outline of how it works.

For what is left, up to the IHT-free limit (the Nil Rate Band “NRB”) is taxed at 0% but the excess is taxed at 40%. Currently the NRB is £325,000, so leaving £326,000 produces an IHT bill of £400. By careful planning even those with an apparent IHT problem may be able to reduce or even eliminate their family’s future tax bill. However, your Will writer will need to look at this carefully with you.

In October 2007 the IHT rules brought in theTransferable NRB, meaning that married couples can leave everything to each other yet still exploit both NRB allowances when the family eventually inherit - effectively letting them pass on 2 x NRB free of tax (currently that gives a total of £650,000)

From April 2009 the Nil Rate Band threshold has been frozen at £325,000. Originally the plan had been to increase it from 2021, but the Budget of 2021 has announced it will continue frozen at £325,000 until April 2026. However, from April 2017 an extra allowance (the Residence Nil Rate Band - “RNRB”) is available to some estates. It relates to you passing your home to your descendants or a few others that the law defines as being close to you - but it does NOT include the likes of siblings nor nephews / nieces. Also your Will needs to be worded appropriately if you want to be sure that it can apply.

Inheritance Tax

Inheritance Tax (IHT) is payable at 40% and complicated to calculate properly - so get advice.

The basic IHT limit (Nil Rate Band) is £325,000, but from April 2017 an additional allowance might apply.

Tax Year

2015 / 16
2016 / 17
2017 / 18
2018 / 19
2019 / 20
2020 / 21

Inheritance Tax & Charities

Since April 2012 there is extra IHT relief for those giving at least 10% to charity. read more

Some Additional Inheritance Tax Exemption

It has been long established that the estate of anyone who passes away due to injuries received whilst on active duties in the armed forces is exempted from inheritance tax. In recent years this tax exemption has been extended to include members of the emergency services who die in the course of their duties.

Initially in 2017 the RNRB allowance was £100,000, growing to £125,000 the year after, then £150,000 and finally £175,000 from April 2020. The Budget of 2021 has also frozen it at that level until at least April 2026. If this extra allowance can be used then it provides a total IHT allowance of £500,000 for an individual’s estate; effectively a combined IHT allowance of £1 million for a couple (legally married or civil partners) where there is a qualifying residence. However the allowance will be tapered off for estates over £2 million. The rules surrounding this are VERY complicated and many executors will be caught out by how to apply the rules. So, do NOT assume that as a couple from 2020 you could pass on up to £1 million free of IHT - you and your family will need a lot of advice and help to ensure that this can happen. Also the use of trusts impacts inheritance tax, sometimes making it worse, sometimes better and sometimes being neutral.