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Don't Leave Inheritance Tax Liability to Chance

Tuesday, 3rd February, 2015

No one wants to pay bills that they don't need to. But if you don't take steps to address your potential inheritance tax liability, your loved ones could be left to deal with a 40% tax bill when you die - one that would need to be settled before they can inherit what you want them to have. 

It is becoming a more common occurrence. Between 2009-2010 and 2013-2014 tax years, inheritance tax revenue increased by around 30%. In December 2014, HM Treasury forecast a further rise of 70% between 2013-2014 and 2018-2019. At this point, according to the Office of Budget Responsibility, almost 10% of estates will be subject to inheritance tax, compared with 2.8% in 2010-2011.

All of this is despite the fact there are simple solutions available for reducing or, in some cases, even eliminating any potential tax bill. 

The inheritance tax freeze continues.

If the value of your estate (which property, cars, jewellery, savings and investments) is above the 325,000 threshold - or above 650,000 if married - your loved ones could be left with a 40% tax bill on the amount above this threshold. If you are widowed, the threshold is up to 650,000 depending on how much allowance was used when your partner passed away.

Inheritance tax is calculated by assessing the value of your estate at the point when you die. So, even if your estate is currently below threshold, you may yet climb above it. 

The government has frozen thresholds until at least 2018. There has been some speculation that this stance will be altered, meaning less estates would be liable. During an election year, inheritance tax is likely to become a political debating point. Yet there are no guarantees that the winners of the general election will implement any changes. In 2010, pre-election pledges to raise the thresholds went unfulfilled.


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