How much is inheritance tax? Inheritance tax is a tax on the estate of someone who has died and the amount that you pay will depend on the total value of their estate.
That figure is calculated based on their assets, which includes any properties they own, the cash they have in savings and in the bank, investments, any vehicles they own, any life insurance policies and any other assets.
Any debts are taken off the total figure and inheritance tax is then worked out based on the total amount.
However, there is no inheritance tax (IHT) to pay if:
- The total value of the estate is less than £325,000
- The deceased leaves anything over and above the £325,000 IHT threshold to their spouse, civil partner, or charity
How Much Is Inheritance Tax UK
The first thing you’ll need to do when dealing with the estate is to calculate the total value of the estate.
IHT is paid at 40% of anything above the £325,000 threshold, so it’s important to get this figure correct.
The threshold might be higher depending on your circumstances, such as if you’re married or in a civil partnership. That’s because if your spouse or civil partner dies, you’re exempt from paying inheritance tax if all their assets are left to you.
Your inheritance tax allowance will also increase by the percentage of their allowance that wasn’t used, which means that when you add the total value of the two £325,000 tax-free allowances AND the £175,000 main residence allowances, you can potentially have a £1 million tax-free allowance.
Of course, you’ll also have to deal with probate and that’s a crucial part of the IHT process. Probate applications have several key stages, starting with registering the death.
How Much Inheritance Tax Will I Pay Calculator
You should note that you MUST register a person’s death within FIVE days of their death in England, Wales, and Northern Ireland (it’s slightly longer in Scotland), and you’ll then be issued a death certificate.
The death certificate is essential as many places will require this as proof to release the money, funds, and assets ready for distribution as part of the estate.
Following this, the probate process will continue as follows:
- You will obtain a valuation on the estate by accessing all bank accounts, pensions, investments, assets, and gaining a valuation on any properties
- You will then need to file inheritance tax (IHT) forms
- After this, probate applications will be filed
- Then probate fees will be paid
- And finally, IHT will be paid
Obtaining a valuation on their estate involves establishing ALL assets and liabilities in the deceased’s name.
This is a key part of the process as it determines what will be distributed as per their wishes outlined in their will – what the value of any investments, pensions, and property are, and whether there are any debts or liabilities.
There are plenty of inheritance tax calculators available online that will help you work out the amount of IHT that will be paid on the estate, including one from gov.uk.
It’s helpful to work this out so you’ve got a rough expectation of what you’ll be paying before seeking legal advice. To calculate the figure correctly you’ll need to know a few things about the estate, including:
- The value of the assets
- How the assets are owned
- The value of any debts and liabilities
- The value of any gifts made in the 7 years before their death
- The value of any charitable donations made
- The total value of assets in different parts of the estate, if relevant
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The good news is that Solicitors Near Me are here to guide you through the entire inheritance tax process and the probate process, too.
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