Tory Proposals For New Inheritance Tax Rates
The Conservative Party have outlined proposals to cut inheritance tax on properties worth up to £1m should they win the 2015 election.
They plan to finance this proposal by tightening tax relief on pension contributions of the estimated 300,000 people who earn more than £150,000 a year.
These proposed changes to inheritance tax rates and pensions contributions could have a profound effect on inheritance tax planning.
Our inheritance tax solicitors have answered some frequently asked questions about the current inheritance tax rates and the Tory proposal. They have also addressed how you can protect your assets for those that mean most to you.
What Is Inheritance Tax?
In the UK, inheritance tax is a tax levied on property, possessions, and money acquired by gift or inheritance. Property, possessions, and money are collectively known as a person’s ‘estate’.
How Much Is Inheritance Tax – Currently?
The current inheritance tax threshold is £325,000. That means that tax is only charged on someone’s estate after that amount.
The threshold rises to £650,000 for couples. Inheritance tax thresholds are sharable for married couples and people in civil partnerships. This means that the tax threshold can be passed by one person to their spouse/civil partner upon their death.
The inheritance tax rates are usually set at 40% on anything in the estate above the tax threshold. However, the rate may be reduced to 36% if 10% or more of the estate is left to charity.
Who Pays Inheritance Tax?
In most cases the ‘executor’ of the deceased’s Will, or the ‘administrator’ of the deceased’s estate pays inheritance tax from the estate.
The government classifies these parties, thus: “An executor is a person named in the Will to deal with the estate – there can be more than one. An administrator is the person who deals with the estate if there’s no Will.
In the case of trusts, it is the Trustees’ responsibility to pay inheritance tax.
Is There A Deadline For Payment Of Inheritance Tax?
Usually, inheritance tax has to be paid within six months of a person dying. Payment can be made in instalments. Late payment interest may be charged if the tax is not paid.
What Are The Tories Proposing?
Upon re-election, the Tories say they would increase individual inheritance tax threshold from £325,000 to £500,000 when a property is included.
This would give married couples and civil partnerships a shared tax-free allowance of £1million.
It was reported in the Guardian that Prime Minister David Cameron said this increase would be financed by reducing the tax relief on pension contributions for people earning between £150,000 and £210,000. The tax relief would be reduced from £40,000 to £10,000.
How To Avoid Inheritance Tax
Else Solicitors advise both individuals and married couples on how save their beneficiaries a substantial amount of inheritance tax.
We ensure our clients make the most of the exemptions and reliefs available.
One way of reducing the amount of inheritance tax paid can be to put some assets into a trust. This is a subject on which Else Solicitors can deliver expert advice.
Our team can give you inheritance tax advice, write your Will so your estate is administered in the way you wish, and can act as executor of your estate.
Similarly, if you are concerned about the distribution of an estate we have an experienced inheritance disputes resolution team that can represent your interests inside and outside the court room.
If you would like to discuss a matter with our inheritance tax solicitors please call 01283 526200 or email firstname.lastname@example.org.