Does Your Property Value Automatically Make You Liable for Inheritance Tax?

According to a recent analysis published by Today’s Wills and Probate, it is predicted that homebuyers across 36% of all UK local authorities will automatically be liable to pay Inheritance Tax (IHT) based on the value of their property alone, versus just 4% two decades ago.

Additionally, while there have been no official statements, changes to Inheritance Tax could potentially make up part of the new Labour government’s first Autumn Budget on 30th October, along with other new taxes and increases, which would affect the number of property owners liable to pay IHT. However, escalating house prices are causing more homeowners to surpass the inheritance tax thresholds, even without any changes to existing legislation.

In the UK, the standard Inheritance Tax rate currently stands at 40%; however, it is only charged on the part of the estate that is above the tax-free threshold. As of 2022/23, the nil band rate threshold is £325,000.

If you leave everything above the current threshold to your spouse, civil partner, a charity, a political party, or a community amateur sports club, there will be no inheritance tax to pay. There are also other allowances and solutions available – such as gifting money during your lifetime or passing on your primary residence to your children or grandchildren – which can help reduce your Inheritance Tax liability. However, it is important to note these strategies are most effective when you plan early and seek specialist professional advice to determine your options for reducing your IHT bill and what reliefs are available.

Inheritance Tax Planning

Inheritance Tax planning is a great way to plan for the future; typically, it allows a person to hand off some of their assets and finances to ensure that those set to inherit when they die do not have to face the costly burden of inheritance tax. If you think that your estate may be subject to inheritance tax, there are several planning measures you can implement to reduce the amount owed. Ways to manage IHT include:

• putting assets in trust
• passing on wealth through pensions
• taking out a whole-of-life insurance policy

At Rose & Rose, we have a team of highly experienced and knowledgeable inheritance tax planning solicitors who can support you in organising your estate in the most efficient way, ensuring that all circumstances are considered and advising on the right solution for you and your family.

To speak to one of our private client solicitors about your estate plan or inheritance tax, please contact us contact a member of our team below or email info@roselegal.co.uk for more information.

This blog post is not intended to be taken as advice or acted upon. If you are seeking legal advice, please contact our team of solicitors.