At its most basic, inheritance tax is payable on:
So far so easy, but there are all sorts of exceptions. So for example:
Don’t think you can give all your property away on your death bed. HMRC is wise to this. You can give assets away, but then have to survive a full seven years for them to fall out of your estate. That said, there are limits: anything considered a ‘normal gift out of income’ (i.e not your house) is exempt, and anything up to £3,000 a year. So if you’re a youthful grandparent, generously minded and you can afford to, you might want to get gifting!
It’s not a straightforward area. And if you’re not married (this all gets very 19th century here) do read up on what this means – it depends on whether you own the property as joint tenants or tenants in common and whether you have a will.
It’s not just cash. Pretty much everything forms part of an estate for inheritance tax – a house, a buy-to-let property, shares, ISAs, precious jewellery, antiques and so on.
Pensions in drawdown (not annuities in most cases) can be passed on free of tax if the person dies before 75 and at the recipient’s marginal rate of tax if after 75. This makes pensions an interesting financial planning tool to consider.
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