Who Will Pay Inheritance Tax?
Sitting here reading this you may winder whther you are liable for Inheritance Tax. The simple answer is that there is no knowing. The only way that you may be sure is if you have significant savings and assets and assume that they will still be worth a significant amount when you die. On the other hand, you may be close to the Inheritance Tax threshold and may be unsure exactly what your Estate will be worth on your passing, or indeed what the threshold will be when you pass away.
Trying to avoid Inheritance Tax can become something of a pastime for those who are sure they have enough in assets, or may have enough in assets to be liable for it. If you are unsure, it pays well to not only get a valuation on your house and assets, but also to project what your property may be worth in the future and what the Inheritance Tax threshold may be at that time. It would be very unfortunate to plan to avoid inheritance Tax, but to then end up paying it as the value of your Estate has arisen, and/or you the nil rate band parameters have changed.
Calculating What You May Be Liable For
As a guide to how complex this is, if you have an Estate currently worth 290’000 with a house worth £200’000 comprising that amount, you may well find that with rising house prices (as one can assume they will rise over all even taking slumps into account) your estate exceeds the nil rate band in two tears, however, with the nil rate band for taxation rising, you may find that you narrowly escape taxation. In this case, the choice of whther to give assets away in the hope that you can avoid taxation is a complex one – if it is not necessary, why not let the assets accrue greater amounts in your life time?
The best policy is to review your Will and Inheritance Tax planning whenever there is a change in circumstances, both for you, or more generally in terms of changes to the law or to the performance of the economy.
If you are under 50 to 60 and in good health your time may well be better spent accruing as much as you can for an enjoyable retirement, rather than worrying about trying to give it all away in order to avoid taxation. Ultimately, following that, the choices you make will be for the benefit of those that survive you, rather than for yourself, so gauge carefully what their needs may be. Finally, remember that whether you pay any Inheritance Tax and how much you pay will depend a lot on whether or not you are married or have a Civil Partner (see related articles). In this sense, be sure to figure your marriage or civil partners income into your calculations.
Finally, if you are very young, or just quite young, and healthy, there is no knowing what the law might be by the time you come to pass away – for now focus on getting on the property ladder and starting up a pension! Though if you are very well off you may well wish to make some provisions to plan for Inheritance Tax, just in case