Barclays Wealth has stated that there are people who do not understand the rules surrounding Inheritance Tax, and they have issued a warning about the levy. Barclays Wealth states nearly a third of those asked wrongly believe ISAs are exempt from Inheritance Tax.
Similarly, 40 percent believe they will be able to gift money to their immediate family without paying Inheritance Tax.
Britons have been proven to be equally confused when it comes to the gifting of property upon their eventual death. Over a quarter of those asked said they did not know if the value of their property would be considered as separate to the rest of their financial assets.
Barclays Wealth has therefore warned many individuals could be “caught out” by their lack of understanding of the rules.
This could mean loved ones face a higher tax bill as a person has not taken the steps while they were alive to reduce their IHT bill as much as is legally possible.
Inheritance Tax Rules
Inheritance tax (IHT) is payable at 40 percent on the value of an estate above a certain threshold of a person who has passed away. To avoid taxation as much as is legally possible, many people choose to take preventative action before they pass away. However, research from Barclays Wealth has shown many people are failing to understand how IHT works.
In England and Wales, if an Estate is worth more than £325,000 when a person dies, then they typically have to pay Inheritance Tax. Currently, the Inheritance Tax rate is 40% on anything above the threshold. If a person leaves more than 10% of the estate’s value to charity, then the rate may reduce to 36%.
If inheritance tax is payable
The grant of representation will not usually be issued until the inheritance tax (IHT) has been paid to HMRC. This can potentially cause a delay in the administration of the estate.
You usually have to pay 10% of the tax due on the value of property and shares plus all of the tax due in respect of the rest of the estate. This tax payment should be made within six months of death. The additional tax is payable in yearly instalments over a ten-year period, or as soon as they are sold. Interest will start to accrue on any outstanding inheritance tax after six months from the date of death.
How we can help
Here at The Inheritance Experts we work with solicitors who have years of experience dealing with inheritance claims. This includes Inheritance Tax matters. Contact us today by filling in our contact form. Or call us on 01614138763 to speak to one of our friendly knowledgeable advisors.