Inheritance Tax calculation
If you are acting as an executor or personal representative you will need to work out if inheritance tax is payable on the estate and how much inheritance tax needs to be paid.
The inheritance tax rules are complicated. The basic rule is that Inheritance Tax is charged at 40% on the net value of the estate over £325,000 however, there are a number of exemptions and allowances that can reduce the amount of tax payable.
The ‘residence nil rate band’ reduces the inheritance tax payable on an estate where there is a residential property that is left to direct descendants.
An estate that passes to a spouse or civil partner is exempt from inheritance tax, and the personal allowance passes to the spouse so that they have a joint allowance of £650,000 after their death.
There are allowances available for certain types of investment including agricultural property and business assets.
It is possible that inheritance tax liabilities can be reduced if the beneficiaries agree to a Deed of Variation to ensure that the estate makes full use of personal allowances, reliefs and exemptions.