Inheritance tax: the one big rule change everyone needs to know

Inheritance tax: Financial advisor provides advice

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The improvement to the inheritance tax rules means that Britons don’t need to report the value of an estate that is below the £325,000 threshold as long as they don’t need to apply for probate. HMRC claims it should make life easier for 230,000 people, already going through a difficult time after someone has passed away.

However, for an estate to be excepted they must meet certain criteria.

What is an excepted estate?

  • The value is below the IHT threshold of £325,000
  • The estate is worth £650,000 or less and the unused threshold is being transferred from a spouse or civil partner that died first
  • Estates worth less than £3million where everything has been left to a spouse or civil partner living in the UK or a qualifying charity
  • The deceased was living permanently outside of the UK when they died and their assets in the UK are worth under £150,000

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It’s not just property where people can be stung by a hefty inheritance tax bill.

HMRC has updated its guidance to help people avoid getting caught out if they plan on giving cash sums, property or assets to family members in 2022.

Its online tool checker is available on the HMRC website for people to work out how much IHT could be due.

However, the checker does not calculate the amount of IHT potentially owed and it might be advisable to speak to an independent financial adviser for clarification.

How to avoid paying inheritance tax on gifts this year:

Check your list to see where the running total goes over the £325,000 threshold. People need to pay tax on:

  • The part of any gift that took the running total over the threshold
  • Any gifts made after the threshold

What is happening where you live? Find out by adding your postcode or visit InYourArea

Britons are throwing away millions of pounds every year in inheritance tax which is easily avoided if they brush up on the rules.

In 2020, the UK gave away £125million in unnecessary inheritance tax through “gifts gone wrong”.

That works out at a quarter of a million each.

Before giving cash this year, Britons should check whether they could carry a tax allowance over from last year.

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