Inheritance Tax
When somebody dies, they may leave behind an estate, which is everything they own at the time of death, minus anything owed, this estate is often left to one or more people and is distributed by a personal representative.
The persoanal representative (or executor of the will) is responsible for paying any tax that is due on the value of the estate, this tax is called Inheritance Tax.
Inheritance Tax may also be due on more than just the estate, it could also be chargeable on any gifts that result in a loss to the deceased person's estate. For example, if Michael owned a painting worth £35,000 and gave it to his daughter, it would be a gift that could be subject to inheritance tax as Michael's estate is at a loss of £35,000.
Current Rates
Currently (in the tax year 2008 - 2009), if your estate at the time of death amounts to the value of £312,000 or more, 40% of that value will be deducted for inheritance tax.
Exemptions
Some situations may result in the deceased's estate (or part of it) being exempt from Inheritance Tax, these include;
- Where the estate is passing to the deceased's husband, wife or civil partner, no Inheritance Tax is due on any amount, even if it is above the limit.
- If a gift is made more than seven years before the death, its value may be exempt.
- Gifts under the value of £5000 that are given for a wedding, civil partnership or to a charity.
THE DIRECT ADVICE TAX GUIDE
Taxes for Individuals
Income Tax - National Insurance - Stamp Duty - Inheritance Tax
Taxes for Businesses