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The 30 million people in the UK who do not have a will are letting the government grab a large chunk of their wealth when they die, when some effective financial and tax planning could mean financial security for their family and loved ones.
Here are some answers to common questions about inheritance tax:
Inheritance tax, often called IHT for short or the wealth tax, is a tax that gives the government a share of everything you own when you die.
IHT is charged at 40% of the net value of an estate that is more than the £325,000 nil-rate band.
In simple terms, when you die, what you owe – your debts – are added up and taken away from what you own – your assets – to leave your net worth. If this is more than £325,000, IHT is paid at 40% on everything over that amount.
Top of the list is property – your home and any investment property.
With the average house price nudging £210,000 (Communities and Local Government Department statistics September 2010), your home and just one investment property shatter the nil-rate threshold.
Other assets include:
The list is by no means exhaustive.
Providing you are considered as domiciled in the UK at the time of your death, then you pay IHT on your worldwide assets.
Domicile is the home country of your father at the time of your birth. You can live in one country and be domiciled in another.
It depends. Some rules relating to ‘potentially exempt transfer’ or ‘PETs’ let you give away certain amounts every year.
If you live seven years after the gift was made, then the amount is considered outside of your estate for calculating IHT.
If you should pass away within the seven-year period, then IHT is charged on a sliding scale.
This depends. The problem is gifting property can trigger capital gains tax (CGT) for the donor and stamp duty for the person receiving the gift.
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