Knowing the fundamentals of planning your inheritance tax and IHT thresholds could be vital for your financial situation prior to and after the death of loved ones. The estate tax was first introduced by the UK in 1986, replacing Capital Transfer Tax. IHT does not have to be paid by all and about 90% of estates are exempt from it because the amount due is based on the worth of the deceased's assets.
How do I calculate Estate Tax in UK? The tax is due on the estate of a person who dies. It covers the assets of the deceased including belongings, property, money, and investments. The deceased's gifts made in the period of seven years preceding the death date are also tax-deductible.
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IHT is usually payable by an executor of the estate or the representative of the person who died. Only estates worth more than that IHT threshold are tax-deductible. The IHT threshold was PS325,000 in 2011-12 for a person who is a single married couple, whereas civil partners and married couples may increase the threshold on the death of their second partner to PS650,000.
If you do not fit into the tax band of nil rate will be required the burden of paying tax at the percentage of 40% on the amount of the estate that is above the threshold IHT threshold. There are times when it is possible to cut down on the amount of IHT due, or even not pay it at all if your assets are over the IHT threshold by obtaining exemptions and reliefs.