There are many aspects of inheritance claims that change year on year. Inheritance Tax changes are a big part of this. 2022 is no different.
Inheritance Tax Changes in 2022
In accordance with the new changes, if a person has died on or after 1 January this year, only the value of their estate needs to be reported when applying for a probate.
If the person died on or before 31 December 2021, no IHT205 form needs to be completed if it is an excepted estate or they do not need a probate.
Overall, there are three types of excepted estates.
- Low value estates
- Exempt estates
- Foreign domiciliary.
People do not have to pay tax on an estate as long as it is passed to the spouse or civil partner of the person who died, a charity or if its value is below the inheritance tax threshold of £325,000.
If the person who died was widowed, the tax threshold can be higher. This is because married couples can combine their individual tax-free thresholds.
There’s also a residence nil rate band if the person who has died leaves their home to their children or grandchildren.
If the deceased was living abroad, inheritance tax might not be due in England and Wales. This is known as a foreign domiciliary, whereby the person who lived outside of the country on a permanent basis died abroad and held few assets in the UK.
Valuing An Estate
People only need to report the value of the estate if they are applying for probate. A probate is the legal process of dealing with a deceased person’s estate. This generally requires the clearing of their debts and distributing assets in accordance with their will. Part of the probate process is getting a grant of representation which confirms legal authority to administer the estate.
Valuing an estate can take several months or even longer if it involves trusts, is a large estate or there’s tax to pay.
Estimating the estate’s entire value is imperative in order to determine if there’s inheritance tax to pay, but not all estates need probate.
Before applying for a probate, people need to calculate the estate’s value. You must also identify assets related to bank accounts, savings and pensions, as well as household goods and personal items.
You must also identify debts such as utility bills, mortgages and money owed on credit cards.
How We Can Help
Here at The Inheritance Experts we work with solicitors who have years of experience dealing with inheritance matters. This includes inheritance tax changes. Contact us today by filling in our contact form. Or call us on 01614138763 to speak to one of our friendly experts.