We all want to leave a legacy and ensure that those we care about are taken care of. When we’re gone, they’ll be well taken care of. That is why making Inheritance plans is important. It is critical to have confidence in your children, grandchildren, and future generations. Those you care about will be looked after for a long time.

Inheritance Tax is a tax levied on the estate of a deceased person. In the current fiscal year 2022/23, the standard Inheritance Tax rate is 40%. Everything you own is included in your estate. This includes savings, investments, real estate, life insurance payouts (not placed in an appropriate trust), and other assets, such as personal belongings. The total value of your assets is then subtracted from the total value of your debts and liabilities.

PASSING ON YOUR MAIN RESIDENCE TO DIRECT RELATIVES

Everyone in the United Kingdom currently has a £325,000 Inheritance Tax allowance (frozen until April 2026). This is referred to as the nil-rate band (NRB). An additional allowance was introduced in 2017 to make it easier to pass on your main residence to direct relatives (such as a child or grandchild) without incurring Inheritance Tax. This allowance, known as the residence nil-rate band (RNRB), is currently £175,000 and is in addition to the standard nil-rate band of £325,000.

When the total value of an estate exceeds £2 million, the RNRB allows for a tapered withdrawal. The withdrawal rate is £1 for every £2 in excess of the £2 million limit.

Visit us again tomorrow as we explore how you can use both tax-free allowances, or contact Woodward Markwell for further information and see how we can help.