With the beginning of any new tax year, it is the ideal time to review your Will, especially if you haven’t done so for a while.
As things stand, the current inheritance tax rate is 40% and if there is anything you can legitimately do to minimise your estate’s exposure to this this, ultimately reducing the taxman’s cut of your loved one’s inheritance, we’re sure you would want to take appropriate action.
Each person has an initial tax-free allowance on death known as the nil-rate band, which refers to the amount of your estate that will not be taxed after your death. Currently, this is set at £325,000. The good news is, this can now be supplemented by the main residence nil-rate band, which adds an additional tax-free allowance of up to £150,000 for deaths on or after 6th April 2019.
However, you won’t be surprised to know that there are conditions which must be met in order to qualify for the for this additional tax relief. These include:
- You may only claim the allowance against a residential property which forms part of your estate and has been your residence at some point;
- The residence must be left to one or more of your direct descendants on your death;
- If your estate is worth more than £2million then you may not qualify for the additional allowance
- The amount of the allowance will be staged – £150,000 for 2019/20; and £175,000 for 2020/21.
This is just a brief overview of the key components of inheritance tax. As you can see, there are lots of issues and complications to be considered to fully minimise the cost you your estate. This is where we can help.
We would always recommend regularly reviewing your Will with a qualified solicitor. They will be able to expertly guide you through the process, highlighting any potential pitfalls and how best to avoid them. We regularly see clients who have current Wills made over 10 years ago, who have complicated trust arrangements, which may not be the most cost-effective way of dealing with their affairs, under the current law.
If you have any questions around inheritance tax or wish to review your Will to ensure you are leaving the maximum possible to your loved ones, we are always here to help. Please call 0161 928 3848 or email mch@mchaleandco.co.uk to arrange.