The Three Basic Things You Need to Know About Inheritance Tax

Find out what inheritance tax is all about, when it is paid, and if you need to worry about it.

12:27 28 February 2013

1.Inheritance tax is a bit simpler than its name implies. It is a tax on your inheritance, but there are certain requirements and restrictions so you do not need to automatically assume that you will be required to pay the 36per cent to 40per cent tax.

 

You’ll want to have someone assess the value of your inheritance first since estates worth less than £325,000 are not taxed.

2.The next point you may be concerned with is when inheritance tax should be paid. Inheritance tax is not actually paid until after you are deceased. This is typically handled by the executor of your estate, or a personal representative handling the details of an estate.

 

Even though this tax won’t be paid until after your death, it is still something you should consider before leaving your loved ones with additional distressing news. Gifts or donations you have given may also be subject to an inheritance tax although there are certain allowed exemptions.

 

3.While you may not feel that you should worry about inheritance tax, it is beneficial to your estate valued so your loved ones will not receive unpleasant surprises in an already turbulent time of mourning. 

 

The value of an estate entails calculating all the assets, less the debts, and includes such things as property as well as all the value of all possessions. Furniture, jewellery, artwork, and other items are all considered part of your estate.

 

Debts can include household bills and funeral expenses, but keep in mind that your estate may need to cover those debts which reduces what you are able to leave your heirs already, not including the effects of paying the inheritance tax.