Inheritance tax FAQs

Inheritance Tax Explained: FAQS

With many assets and factors to consider, Inheritance Tax (IHT) planning can be a tricky business. Your solicitor will help you plan your estate and ensure you make the most of all available tax relief schemes to reduce your bill and protect your inheritance for those you wish to leave it to.

Will I have to pay inheritance tax?

As the estate owner, you don’t pay inheritance tax. This tax is paid by your beneficiaries after you die.

Whether or not they pay IHT is dependent on, amongst other things, the value of your estate. If your combined assets are worth less than the Nil Rate Band (currently: £325,000), then there is no inheritance tax to be paid. This means your beneficiaries can usually inherit £325,000 of assets before they need to pay inheritance tax. 

The Inheritance Tax bill is drawn from the value of your estate. Whatever is left after IHT has been paid is then transferred to your beneficiaries, as per the instructions in your Will.

By carefully planning your estate, you can reduce your IHT and ensure your heirs receive the maximum value from your estate. Contact Crombie Wilkinson Solicitors today to discuss how we can help you reduce your inheritance tax bill.

Will my estate/children have to pay inheritance tax?

Whether or not your children (or any other beneficiaries) have to pay IHT on your estate will depend on various factors, including the total value of your assets and who you bequeath your primary residence to.

There are also various tax relief systems in place that can reduce your IHT bill further and ensure your children/beneficiaries benefit entirely from your legacy. These can include gifts, trusts, business investments and charity donations.

Contact Crombie Wilkinson Solicitors to discuss your options. We will help you plan your estate in a way that reduces your inheritance tax bill so your children or other beneficiaries can inherit the highest amount possible.

How can I save on inheritance tax?

There are many strategies you can use to save on your inheritance tax bill, including gifts, trusts, charity donations and business investments.

The best way to reduce your IHT is to work with an expert solicitor who will be able to guide you on the steps you can take to ensure your beneficiaries receive the highest amount possible from your estate.

Contact Crombie Wilkinson Solicitors to see how we can help you save on your inheritance tax bill.

How can I protect my children’s inheritance if I move into a care home?

If you’ve spent decades paying off a mortgage to create an inheritance for your children, the last thing you want to do is have to sell your property to pay the fees for residential care. Unfortunately, this is a very real possibility for many families in the UK.

You may think gifting the property to your children before your death is a good idea, but this could actually cause more issues down the line – both from a personal and an inheritance tax point of view. You can read a number of blogs we have about this topic on our website:

We can help you plan ahead and consider all your options when it comes to protecting your children’s inheritance. Contact us today to arrange an appointment.

Will I have to pay inheritance tax on my pension?

Pensions are usually exempt from inheritance tax. Depending on factors like the type of pension and the age you die, you can bequeath your pension money relatively easily. However, please be aware that the Autumn Budget 2024 announced Inherited pensions will be brought into inheritance tax from April 2027.

Distribution of your pension assets will not usually be covered by your Will, however. You will have to tell your pension provider ahead of time who you want to inherit any of your remaining pension funds when you die.

Get in touch with Crombie Wilkinson Solicitors if you have any questions regarding inheritance tax and pensions.

Can I pass my property to my children?

As long as you are the sole, living owner of your property, you can directly bequeath it to your children in your Will.

Your beneficiaries don't usually have to pay inheritance tax on a house if you gifted it to your family seven years before you die. However, if it was gifted within the seven year threshold and you've gifted more than £325,000 of non-exempt gifts then tax will be due. 

If you’re a part-owner or a joint tenant then there will be other elements to consider. You may also need to think about inheritance tax, and how your property fits into a wider estate planning strategy.

Our expert solicitors can offer advice on leaving your property to your children in your Will. 

How do I make sure children from my first relationship can inherit from my estate?

If you want to protect the inheritance of your children from a previous relationship, you must create a Will specifically expressing how you want your estate to be disposed of.

When you get married again (whether it’s a second or seventh marriage), your existing Will will become null and void unless it’s carefully worded. Inheritance law states that husbands, wives and civil partners automatically inherit, so if you haven’t planned your estate accordingly, you could find your children do not inherit anything.

Why is inheritance tax so high?

The aim of inheritance tax is to prevent the build up of property and wealth over generations without benefit to the wider country. It aims to redistribute income so some earned wealth goes back to the state. For example, if a property becomes more valuable over a person’s lifetime due to the market, inheritance tax means the state would also benefit from that growth in value.

When do you have to pay inheritance tax?

There is a six-month period from the recorded date of the person’s death before which inheritance tax bills should be paid. After this date, the HMRC can start to charge interest on the amount due. Agreements can be reached to pay the bill over long periods of time, but interest will still be charged.

Usually, you can pay a lump sum before the six-month period, even if you haven’t finished valuing the estate. With high-net-worth individuals, it can take many months to get an accurate value for all assets – especially if there has been no estate planning. So, a ‘payment on account’ is used to prevent interest being charged. If this payment is more than the final IHT bill, HMRC will refund you the amount.

How much can you inherit before paying inheritance tax?

In the UK, in theory, you could inherit up to £1m before paying tax. This happens when second person in a married couple passes, and both have used their full IHT allowance. They both would have a £325,000 tax-free allowance, plus the £175,000 main residence allowance (£500,000) for both of them (£500,000 x 2 = £1m).

Get in touch with Crombie Wilkinson Solicitors to see how we can help you plan your estate, write your Will, and protect your children’s inheritance.