A person throughout his lifetime has a single goal to earn money and make his life successful. Successful in the term that he can afford different luxuries according to his requirement. Once the needs are fulfilled, the extra money automatically goes into the money-saving pot. Just for a second, you need to visualize this pot in detail. It’s not only a box that collects your money, but this pot can be in any shape. Some of the forms are investing your money into another thing. For sure, selecting this thing to be from a non-tax list would be a wise step!
“Once the needs are fulfilled, the extra money automatically goes into the money-saving pot.”
Now covering the whole life span of an average person, the youth is considered the money building and money-saving period. Old age is considered enjoyment time where a person retires and enjoys a pension or any other investment that turns out to be a money providing option.
After the older age comes death and the savings are left behind. Every living human being or living creature will die, it’s an inevitable event, just like the process of aging. Wiser human beings plan their life throughout from day one of their earning period keeping in mind the death event.
Knowing all the details, it’s essential to understand the concept of inheritance tax. When a person dies or is on his death bed, the ultimate thing that connects him to worldly matters is the thought of passing the maximum amount of his wealth to his young ones. A sense of protection can overwhelms him and lets him make some significant decisions, including rectifying the will.
“When a person dies or is on his death bed, the ultimate thing that connects him to worldly matters is the thought of passing maximum to his young ones.”
Passed assets, if they surpass a certain amount, require the application of inheritance tax on the purchases. None of us wants our money to be deducted even after our death, even if the money is not going into our pocket. So there are many ways advised by accountants or tax experts to convert the assets into a limit below the threshold amount.
Moving towards the most basic question about death tax is
- What is the threshold for inheritance tax?
- When to pay inheritance tax?
- How much inheritance applies to the transferred assets?
Inheritance tax is applied to the assets passed from the dead person to his loved ones. These assets could be in a wide variety, including gifts, cars, houses, shares, art, jewellery, and other investments. If passed through a specific limit, all of these assets will be subjected to the influence of inheritance tax.
“All of these assets, if passed through a certain limit, will be subjected to the influence of inheritance tax.”
Don’t get stressed by looking up the above list because there is a piece of good news for you. Some assets are tax-free, and no inheritance tax gets subjected to them. These are gifts on which seven years are passed. It is essential to consider the timings of gifting some assets to your children. If seven years are not completed and time is approached, a small fraction of the death tax applies to gifted purchases.
Business assets are wholly omitted from inheritance tax. One thing to be kept in mind, though, is if the business area coincides with the personal space that your grandpa used to use for his personal use, it might bring a cloud of inheritance tax over your head.
If you are looking for some additional allowance, you should be able to get it. Where there is a will, there is a way. Keep in mind this detail, if people are married, then the threshold limit for both persons gets added up, and an additional allowance is supplied.
“If people are married, then the threshold limit for both persons gets added up, and an additional allowance is supplied to them.”
Let’s suppose the husband has the IHT band of £325,000 and the wife also has the IHT band of £325,000, then the whole allowance comes out to be £650,000. It doesn’t mean that both of them will pass this together to the children. But the scenario goes in the way that the husband might pass away, giving the remainder to his wife. Now the inheritance tax band will become £650,000 for the wife. So enjoy the benefit!
When is Inheritance Tax Payable?
The inheritance tax needs to be paid six months after death. If not paid, the assets might be frozen, which means you can’t access the support to use them. The six months period is usually enough to clear your matters.
There is another opportunity for the descendants to pay their inheritance tax. It’s called installments and it’s a ten year payment plan. The first installment should be made six months after the death, and it includes twenty percent of all the transferred assets.
The second payment covers the other end of the installment, which needs to be made annually. Installment options are for the assets that include property, shares, business assets, and agricultural assets. Interest will be charged on all the transfers, and it needs to be considered, so get in touch with your family tax accountant to guide you properly.
It is the crucial period when you are suffering from the loss of your loved one but, again, wise steps made by the passed person will make your money receiving journey relatively easy. It’s a synchronization process where both planning before death and executing after the end needs to be synchronized to obtain the optimum amount after deducting the minimum quantity of tax. Paying corporation tax for the whole life and then after death doesn’t seem fair to many, but proper guidance can help minimise the amount you’ll have to pay.
Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.