Accountants in Manchester

Accountants in Manchester – Understanding Inheritance Tax

Whether one is a chipper young thing still living with a belief in their immortality, or a more mature individual looking to the winter of their years, considering what will happen once we’ve gone is never a pleasant thing. Most of us will leave any planning that’s needed right until the very last moment, simply so that we don’t have to think about the whole business of death.

Unfortunately when it comes to some things such tax, not planning can waste a lot of money that could have been saved. In the UK we are subject to many different taxes, some attached to our working lives, some to our shopping trips and one in particular attached to our deaths.

Inheritance Tax comes into play when someone dies and their ‘estate’ is valued as being worth over the threshold set by the Chancellor (for 2010-11 this was £325,000). Someone’s ‘estate’ comprises of any cash in bank accounts, investments, property and businesses, and so even a moderately well-off business owner’s estate could be effected. When your estate is valued over the threshold set, Inheritance Tax is payable at forty per cent on the amount over the threshold.

Gifts and trusts made during a person’s lifetime are also subject to the tax, unless made at least seven years before they die, and so it is not possible to avoid the tax by simply giving everything away prior to death (unless of course you are happy to live without your cash for at least seven years in order to benefit your heirs!) There are ways however that gifting can lower your Inheritance Tax bill, if it is done within HMRC’s rules, so it is worth sitting down with an accountant to see what is possible.

Even if an estate is valued over the threshold, there are situations when Inheritance Tax does not have to be paid for instance:
When an estate goes to a spouses and/or civil partner it is usually exempt from Inheritance Tax, as are wedding gifts to others, although it is important to note that any wedding gift given must be genuine and not for profit.

The tax is also not usually payable on gifts bequeathed to UK registered charities, and if the deceased owned woodland or National Heritage property there is usually some tax relief available.
It is obviously important that you make a will, to prevent things happening to your estate that you had not intended, but before you do, it is important to get some good professional tax advice. If your estate is likely to exceed the threshold set by the Chancellor, sit down with your accountant and discuss your options, there are ways to lower potential Inheritance Tax bills after you’ve gone that stay within the rules, but you really do need a professional to explore these for you.

Once your accountant has given you the options and you have made your decisions, sit down with your legal advisor to put everything in a will. Forcing yourself to face the subject of your estate after your death, could save your relatives and other beneficiaries thousands of wasted pounds.

Technorati Tags: accountants in manchester, death tax, inheritance taxation, UK inheritance tax