Inheritance Tax (IHT) is a tax on your estate, if you plan to pass it after your death. Your estate includes all, property and land, savings, jewelry, shares, cars and other assets, after taking away any debts and liabilities. Your heirs could pay up to 40% of the value above the threshold of £325,000. 

IHT must be paid within six months of your death. If not paid, Probate cannot be granted and your assets can not be transferred to the beneficiaries. 

We at Finawis Advisors can assist you with the most efficient plan on bequeathing to your children and other beneficiaries by advising and discussing with you through reliefs and trust options to suit your particular needs, and making sure every allowance and exemption is being utilized. 

Gifting is often used by families to pass on assets. These gifts will still be part of your estate for IHT calculations for 7 years. Such gifting may not always be recommended as (1) due care needs to be taken to ensure your future needs are met and (2) it is not protected against risk such as Divorce, Creditors or Bankruptcy, Generational Inheritance Tax IHT, or even their own future Care Costs. Our experienced Estate Planners work closely with you, understanding your financial position, keeping in mind your present and future needs are met and advising you of best options to meet your specific objectives. 

How much IHT will I have to pay? 

Your value of your estate over the Nil Rate Band (NRB) and Residential Nil Rate Band (RNRB)  is subject to 40% IHT  

  1. NRB is available to all. You pay no Inheitance tax for value of estate upto £325,000 known as Nil Rate Band (NRB). 
  1. There is no Inheritance tax on the amount that you bequeath to your spouse or civil partner  
  1. Similarly,  gifts to a charity or a community amateur sports club is exempt from Inheritance tax  
  1. The Resident Nil Band Rate (RNRB) rebate of £175,000 can be availed if you own a residential property and bequeath to children or your grandchildren (lineal descendants), however this tapers for estates over £2m.  
Example 1:  

Mrs. and Mr. A have a house worth £900,000, have an ISA & other savings of £200,000 between them and a joint WOL insurance policy of £1,000,000. They have two children and wish to leave their wealth to them. 

Inheritance Tax:  £ 440,000. The children will inherit £1,660,000. 

Example 2: 

Mrs. and Mr. B have a house worth £600,000 and have an ISA & other savings of £300,000 between them. They have no children. They wish to leave their wealth to a nephew who needs financial assistance. 

Inheritance Tax:  £ 100,000. The nephew will inherit £800,000. 

FAQs - IHT

  • I have a Will, do I need Estate Planning?

    Wills and Estate Planning are often used interchangeably but it’s important to recognize they don’t mean the same thing.

    Our Estate Planner will work with you to estimate your potential inheritance tax obligations and provide you with tailored advice.

  • Is Estate Planning same as Will Planning?

    Will Planning is a simple process of documenting your wishes and what happens to your assets in the event of your death.

    Estate Planning is a more comprehensive process incorporating various documents pertaining to securing and passing of your assets in the most tax efficient way.

  • How much can I give as gifts each year?

    Annual exemption: You can give away a total of £3,000 worth of gifts each tax year without them being added to the value of your estate. This is known as your ‘annual exemption’.

    Small gift allowance: You can give as many gifts of up to £250 per person as you want each tax year, as long as you have not used another allowance on the same person. Birthday or Christmas gifts you give from your regular income are exempt from Inheritance Tax.

    Gifts for weddings or civil partnerships: Each tax year, you can give a tax free gift to someone who is getting married or starting a civil partnership. You can give up to:

    £5,000 to a child

    £2,500 to a grandchild or great-grandchild

    £1,000 to any other person

    Regular payments/Excess Income Gifting: You can make regular payments to another person, for example to help with their living costs. There’s no limit to how much you can give tax free, as long as:

    • you can afford the payments after meeting your usual living costs
    • you pay from your regular monthly income

    These are known as ‘normal expenditure out of income’. They can include: paying rent for your child,  paying into a savings account for a child under 18,  giving financial support to an elderly relative

    If you’re giving gifts to the same person, you can combine ‘normal expenditure out of income’ with any other allowance, except for the small gift allowance.

  • Can a life insurance policy cover my Inheritance Tax Bill?

    Yes, life insurance policy can cover a part of or your full IHT bill before Probate is granted. It can protect your assets from being sold to pay IHT making things easier for your family. It required special planning.  To know more, please contact us.

  • How am I going to afford long-term care?

    Finawis Advisors can help you plan your long-term care and funding you may need to support your later years.

  • Are trusts tax efficient?

    A trust can be a great way to cut down your IHT bill. Our expert advisors can guide you through the process.

  • Are my heirs subject to any other taxes?

    Your heirs may be subjected to Income Tax, Capital Gains Tax and may also get their benefits affected if they have more than £6000 after inheritance.