Inheritance tax is levied on the value of a person’s property at the date of death. This usually includes property, money and assets and must be paid within six months. All 40 percent of all assets above GBP 325,000 are charged. Between April and December 2021, HM Revenue and Customers (HMRC) received over GBP 4.6 billion in IHT. In context, it was £ 600 million more than in the same period last year, suggesting that more families fall under the inheritance tax threshold. While the IHT threshold remains frozen at GBP 325 000, property values have risen, meaning more households have to pay a fee once their loved ones have passed.
Financial experts from NFU Mutual remind the public of a useful tax-saving measure that would allow families to take home £ 140,000.
Many households benefited from tax relief on their main house when they passed it on to a direct descendant, known as the “zero rate zone for the main residence” or “family house allowance”.
It is currently GBP 175,000 and couples or civil partners can share the contribution.
The contribution, introduced in 2017, allows married couples to hand over property worth up to £ 1 million to direct descendants, including a family home.
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People who sell expensive property for downsizing or go into care may apply for a “downgrade”, so they are still entitled to a new limit if most of the property remains with direct descendants.
This tax rebate can be used by households to reduce inheritance tax, but families must apply for the rebate within two years of death.
In an interview with The Telegraph, Sean McCann of NFU Mutual said: “More people are declining due to stamp duty and our aging population means that more and more people are selling their homes and moving into care.
“In addition, the rules apply to anyone who has sold their house or downsized to a smaller property since July 2015. That means the claims window is growing, and over time, more people will be captured who will lose thousands unnecessarily because of the tax administrator. ”
DO NOT OVERLOOK
People can apply for this reduction allowance only if they leave their home as part of their property.
In addition, the property is required to be the home you once lived in, rather than a property to buy and rent.
People who own more than one house in which they both lived must rely on the executor of their estate to choose which house will be used to contribute to the family house.
To be eligible for this tax reduction measure, a house must be inherited by direct descendants.
In this case, HMRC classifies it as one’s children, grandchildren, stepchildren, stepchildren, or adopted children.
Nevertheless, a son or daughter can inherit the relative of his relative together with his / her spouse and still claim the allowance.
People who die without leaving their children cannot benefit from the allowance, as this support will not be extended to nieces, nephews or siblings.
In addition, this tax reduction measure cannot be applied if the assets have a value of GBP 2 million or more. Every GBP 2 of property above this limit of GBP 2 million will lose a GBP 1 contribution.