Inheritance tax in UK can cost dependents thousands. Indeed, major chunk of HMRC was consisted of inheritance tax last tax year. However, to some extent, you can legally avoid inheritance tax in UK by doing effective inheritance tax planning. Inheritance tax rules can be difficult to comprehend, but it’s important to understand the rules in order to avoid superfluous taxes.
The essence of inheritance tax is bit controversial. The basis of implementing inheritance tax is that without paying it the dependents of the rich will stay rich. Therefore, inheritance tax redistributes wealth in order to ensure, some amount of money goes to Government, to be utilized for the benefit of all.
Valuing an estate is also an important factor in inheritance tax. Therefore, you will be required to:
- Enlist all assets and consider the value of inherited assets at the date of death.
- Deduct debts and liabilities of deceased person (if any).
- You must keep record of how you calculated the value of assets i.e. valuation report of an estate agent.
- As per the law, you are required to keep records for at least 20 years after the year in which Inheritance Tax is being paid.
Assets include valuable items like money in a bank account, land & property, jewelry, shares in a company, a payout from an insurance policy and other jointly owned assets.
Assets given away by the way of gifts in preceding seven years (in certain cases 14 years) from the death of the person shall also be considered for the purpose of calculating the amount of inheritance tax.
Whereas, amount of debts and liabilities includes mortgages, credit card debts household bills, funeral expenses etc. However, costs incurred after the death of person, other than specified above, cannot be considered for deduction from the value of assets for the purpose of calculating the amount of inherited assets.
How we can help?
Inheritance tax can be complicated to understand. However, you can legally avoid the inheritance tax by seeking professional advice for effective inheritance tax planning. Our experienced and well diversified team can assist you with effective inheritance tax planning.
