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Death and taxes in the UK

THE AMOUNT you can currently leave without being liable for IHT on your Estate is £325,000.00. This amount is known as the Nil Rate Band (NRB), any amount above this is taxed at 40%, with some exceptions (gifts to charities) reducing that percentage. Also gifts you make during your lifetime which exceed £3,000 in a tax year may reduce your individual NRB when you die.

Of course, there will be no IHT to pay on transfers between spouses or civil partners even if your estate exceeds the NRB and when the surviving spouse dies there could be available, up to twice the NRB (£650,000) to offset against their estate.

The Residence Nil Rate Band (RNRB) which came into effect in April 2017 introduced a further £100,000 to the NRB. This is a starting point and will increase by £25,000 each year up to 2020/21 (thereafter with inflation) when it will amount to £175,000 per person giving each individual a maximum allowance of £500,000 (£325,000 + £100,000 + 3 X £25,000) which if transferred to the surviving spouse will give them an allowance of £1 million to offset against IHT.

Unlike the NRB, the RNRB does not apply to lifetime transfers (for instance, transfers into trusts or gifts given within seven years of death). Potentially you could use up the NRB by giving gifts within the seven years before death and still be able to take advantage of the RNRB. Equally, if the deceased had moved home or downsized to a smaller or cheaper home.

In April 2016, the Office for National Statistics forecasted a £4.6 billion IHT take for the government, the highest in history, with the number of families liable for IHT rising from 15,000 in 2010 to 40,000 in 2016 and increasing the likelihood of you being liable for IHT.

An estate would qualify for the nil rate band if:

• The deceased died after 6 April 2017

• The deceased owned an interest in property that was included in their estate

• The property (or share of it) is inherited by a direct descendant

• The estate is valued at less than £2 million.

Considering all of the above; a three-story town house purchased in Stoke Newington in 1962 for £5,000 may well now be worth £1 million or more and unless it were transferred to a spouse, civil partner or direct descendant, on your death your estate could be currently liable for IHT of £230,000.

UK PROBATE – proposed changes to fees could hit you hard

Sorting out the estate of a deceased loved one can be challenging to say the least, however the proposed changes to probate fees are set to cause more heartache.

A Grant of Probate (the legal authority to sort out the deceased’s estate) currently commands a fee of £155 payable to the Probate Registry.

A new regime to be introduced after the General Election is set to ramp-up the current fees. As things stand if your estate is worth less than £5,000 there is no fee to pay. The new change raises the threshold from £5,000 to £50,000. However, many estates which have benefited from decades of rising property prices are likely to be worth well above the £50K threshold.

Under the new regime estates valued between £300,000 and £500,000 for example would incur probate fees between £1,000 and £4,000, whilst an estate worth more than £2 Million will incur fees of £20,000, a significant ramping up of the fees from the current £155.

The advice here, is don’t delay the administration of the deceased’s estate.

To discuss your Inheritance Tax and or concerns with Probate, Wills and Lasting Powers of Attorney or how to protect your estate, call free on 0800 689 0386, email info@afclegal.co.uk or click here or here.

The information provided above is of a general nature and should not be taken as the provision of legal advice, rather it provides a basis for creating an attorney/client relationship and requires the completion of a written retainer agreement as a pre-requisite to the provision of legal advice and services.

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