At a rate of 40% over the ‘nil rate band (currently £325,000 per person), tax can severely hit the estates of both married and unmarried people.
However, you can implement some basic long-term financial planning now that will eliminate, or significantly reduce the amount of inheritance tax your loved ones pay after your death.
In the 2014/15 tax year, everyone is allowed to leave an estate valued at up to a £325,000 without their beneficiaries paying tax on it. The amount is set by the Government and is called the nil-rate band, because it’s the amount you pay a “nil-rate” of IHT on.
Above that amount, anything you leave behind is subject tax of 40% (or 36% if you leave at least 10% of your assets to a charity).
When you die, any assets left to your spouse or registered civil partner, provided they’re UK-domiciled, are exempt from inheritance tax. On top of this, your partner’s inheritance tax allowance rises by the amount you didn’t leave to others, meaning together a couple can currently leave £650,000 tax-free.
While transfers of property and other assets between married couples or civil partners don’t attract inheritance tax, this isn’t the case for unmarried couples.
If you’re not married, but own assets jointly with another person, the situation gets complicated, especially where a residential property is involved. Your liability to pay IHT will depend on whether you and your partner own the property as ‘joint tenants’ or ‘tenants in common’ and whether there’s a will and the need for individual advice is essential so that you can protect your estate and ensure that your wishes are carried out.
The first step in protecting your assets from the tax man is to get in touch with us. Our experienced staff will be able to provide you with the specific advice for your exact situation.