We are often asked – “How can inheritance tax affect me ?” by people who never thought that they would be in a position where this tax would touch them. The tax was always thought of as one that affected the rich only. In days gone by, this was definitely the case. But now inheritance tax is charged on the estates of middle-income earners across the United Kingdom. Let’s take a look at how can inheritance tax affect me –
When is inheritance tax paid?
When someone dies, their estate is assessed for value. To establish this value, many things are taken into account –
- The value of your home
- Any money you have in savings accounts
- The investments you hold
- Life assurance policy payouts that are not held in trust
- Your share in any business
And all of this can add up over time. If you have investment properties then these are included too and the value of your estate can soon take you over the threshold of £325,000. There are always stories in the press about people who live frugally and amass a lot of money over their lifetime. Imagine the inheritance tax on millions of pounds.
“ Can inheritance tax affect me ?” is the question. It certainly can! Is the answer.
Why have so many ordinary people ended up paying inheritance tax?
Can inheritance tax affect me is a real issue that people face all over the UK when they die. The value of their estate can take a significant hit when the tax man takes their cut. The reasons this happens include –
- The rising price of property
- The fact that the thresholds haven’t kept up with house prices
- The increasing business ownership
Let’s take a look at these in more detail as they provide a lot of the answers to the question “ Can inheritance tax affect me ?”
Property prices have risen at a high rate overall since the 1980’s. This has meant that people live in their largest asset. When they pass away, this asset can take them out of the safety zone and into the realms of inheritance tax. So, the home will usually need to be sold, and quickly. Inheritance tax bills are due 6 months after death, which leaves little time to sort out the affairs of a loved one.
Hand in hand with this is the fact that inheritance tax thresholds (the part of your estate which you don’t need to pay tax on) haven’t kept up with property prices at all. In the past it was the rich that were paying inheritance tax but those on middle -incomes (and those that have been made rich by the value of their home) have been paying a larger share of the overall inheritance tax take.
More people than ever are business owners and this often means that their share in the business is taken into account by the HMRC. The way that a business Is owned can make a significant difference in terms of tax so always take professional advice in this area.
This shows that “ Can inheritance tax affect me ?” is a legitimate question for all of us to ask ourselves.
Can inheritance tax affect me ?
There are ways of ensuring that you lower or remove the burden of inheritance tax. Not everyone ends up paying it if they have planned correctly in the first place. If the Duke of Westminster can do it, then we can all plan for the future.
Inheritance tax is something that can stop your money going to the people you have chosen. Working to build up an inheritance has become a normal part of life. Giving to the next generation and letting them enjoy the fruits of your labour can be undermined if you haven’t taken the right steps in this area.
But you don’t have to grin and bear it. There are legal steps that you can take in order to plan for your passing. If you take a little time to get your financial affairs in order then you can lower the amount of tax you pay or remove it altogether. We suggest you start looking at this as soon as you can – don’t wait until retirement or beyond. Preparation is the key with inheritance tax.
Ask the question – “ Can inheritance tax affect me ?” and if you fear that the answer is “Yes,” then get in touch today.