Financial Advice
With inheritance tax revenue at record levels, it’s really important to consider the legacy you want to leave your loved ones Coping with the loss of a family member is one of the most difficult experiences you can go through – and, for many, it can be fo
When it comes to inheritance tax, we've got personalised financial advice to help you and your family
It’s really important to keep your will upto-date. Over time, you and your family’s circumstances may change. By regularly considering if your will continues to match who you want to inherit your estate, you can make your intentions clear. Many people select a loved one to act as their executor but it can be DIffiCult to HAvE ConvErsAtIons ABout your legacy. By having suitable plans in place, you could reduce the stress they may experience sorting out your AffAIrs. Speaking to a professional is recommended and can strengthen your plans. With some careful planning, you could address inheritance tax so your loved ones don’t face an unexpected shock.”
This is because of the various complexities of sorting through a loved one’s financial affairs, which can be time-consuming, bewildering and expensive. Probate fees, legal costs, statutory notice charges, even swear fees might need to be covered. And on top of that, thousands of families may face a further, unwelcome issue. If the value of all your possessions – known as your estate – is above a certain limit, inheritance tax of 40 per cent could be charged on everything you own above it. In most cases, it would fall on your family to pay it. That means your family could face a frantic six months, attempting to settle your affairs. And although some of these complications are unavoidable, there is plenty you could do – in advance – to reduce these potential issues. What’s more, it could make a difference to your loved ones, financially.
Where to begin
When someone passes away, the executor of the estate – usually a family member – is appointed to find the deceased person’s assets and manage them until they are distributed to the inheritors. Before the inheritance can be dispersed to the people you want to benefit, any outstanding taxes and debts out of the estate need to be settled. This includes any inheritance tax owed. The executor of the estate is required to provide accurate valuations of your estate’s assets, which include your home, cars, savings, investments, jewellery, antiques – even your home furnishings. All this needs to be reported to HMRC, who will also assess and – if they deem necessary – challenge the stated valuations. For example, in the 2017/18 tax year, HMRC launched 5,400 investigations into inheritance tax returns, according to research by UHY Hacker Young. After deducting any debts such as a mortgage, your estate will be given an overall value. Should this value fall above your nil rate band, everything above it will be taxed at 40 per cent. Inheritance tax nil rate bands stand at £325,000, if you’re single or divorced, or up to £650,000, if you’re married or widowed. An additional residence nil rate band, currently worth £150,000 per person and rising gradually to £175,000 by April 2020, is also available. However, it can only be added to your overall nil rate band allowance if you leave a property you have lived in to a direct descendent, such as a child or grandchildren. Thresholds depend on your individual circumstances and prevailing legislation, both of which may change in future. An inheritance tax bill can run into thousands of pounds. And as it has to be settled before the inheritance is distributed, the executor of the estate will usually have to find the money elsewhere to settle it. And if they can’t pay it within six months, interest will start to be charged on top. As of May 17 2019, this rate of interest is 3.25 per cent.
An unwelcome legacy
Annual inheritance tax revenue has reached record high levels. Over the 2018/19 tax year, £5.4 billion was estimated to have been collected by HMRC, with 22,000 estates incurring a liability. What’s more, annual inheritance tax revenue is predicted to DOUBLE by 2030†, reaching more than £10 billion a year. Your estate is the fruits of a lifetime of hard work. If you want to retain control over who inherits it, making plans could reduce the uncertainty and stress your loved ones may face – and potentially mean they benefit from a larger amount of inheritance. There are a number of options available to you, which is why Mail Finance has teamed up with Skipton Building Society to help. For more than 30 years, Skipton has been offering personalised financial advice on the subject of inheritance tax. It is a national organisation with financial advisers based all over the UK. Alternatively, you can even arrange a Skipton video appointment to speak to a professional from your tablet or laptop. During a review, your adviser will take the time to understand your circumstances and help you determine whether inheritance tax is something you need and want to plan for. If you’d like advice, they can present tailored recommendations to help you start to address your potential liability, with no pressure to act on their advice.
It is important to be aware that some solutions may put your capital at risk, so you may get back less than you originally invested. Some areas of inheritance tax planning are not regulated by the Financial Conduct Authority. Your family might not have to worry about inheritance tax, but why leave it to chance? By calling Skipton’s team today, you can receive a free consultation to help you determine whether you might have a liability and if you could benefit from financial advice.