A Summary of Inheritance Tax

by Mark Riley, Founder & Managing Partner, MJR Solicitors

What is Inheritance Tax? (IHT)

Inheritance Tax (IHT) is a tax that needs to be paid on your estate – which includes any property, possessions, money, or insurance policies – after your death. How much IHT needs to be paid will depend on the value of your assets after any debts, but any assets left to your spouse or partner may be exempt from IHT as are any assets you leave to a charity.

How much is Inheritance Tax?

The IHT payable depends on the value of your assets after any debts, and it can be as much as 40%. But there is a tax-free allowance we all get called the Nil-Rate Band (NRB), which means your beneficiaries can inherit up to £325,000 from your estate without having to pay tax on it. On estates above the NRB, there is a standard 40% IHT rate. However, there is usually no IHT to be paid if:

• your estate’s value is under the NRB threshold of £325,000

• everything over the threshold is left to your legal spouse or partner

• everything over the threshold is left to an IHT tax-exempt beneficiary

But if you’re leaving property to a beneficiary who’s a family member, a Residence Nil-Rate Band (RNRB) might also apply. This is an extra tax-free allowance that can also be used if you leave any property you’ve lived in for a direct relation (a child, grandchild, or sibling etc). This is currently set at £175,000 and means that, when combined with the NRB, you could leave an estate up to the value of £500,000 IHT free.

The freeze on Inheritance Tax thresholds

The £375,000 NRB on IHT has been the same since 2009 while the current £175,000 RNRB has crept up over the years in line with inflation. But at the 2021 budget, the Chancellor announced he would freeze the level at which people start paying IHT for a further 5 years. This means the basic NRB will remain at £325,000 and the RNRB at £175,000 until 2026.

An IHT tax freeze like this is significant and it can be seen as good news for many and will see your asset rise in value. But any estate value that goes over the NRB standard rate of £325k, means your beneficiaries will need to pay it. And with increased energy and food costs, the recent NI hikes, and rising inflation, there will be a growing number of families that might be adversely affected and struggle to pay.

The 5-year IHT freeze and continued rising costs add even more importance to your IHT planning. It gives you an ideal opportunity to review your estate and make sure as much of it goes to your intended beneficiaries instead of to the government. To avoid that outcome, early and careful preparation will mean your beneficiaries will benefit most.

Inheritance Tax planning with MJR Solicitors

IHT planning can be complex with different requests and circumstances to take into account. But MJR Solicitors are experienced specialists in making it a process that’s easy to understand for you.

Book your FREE 30-minute consultation with us today by calling our team on 01243 945 054, emailing us at info@mjrsolicitors.co.uk, and we’ll give you the guidance you need to start your IHT planning today.

Tel: 01243 945054 info@mjrsolicitors.co.uk www.mjrsolicitors.co.uk

Regardless of your age or current health or wealth status, it’s never too early to take steps to ensure that your loved ones are protected in the future in case of your death or if you were ill and unable to make your own decisions. With our wealth of knowledge, our legal experts can help you plan and protect your family’s future and ensure your wishes are fulfilled.

At MJR we can provide a full range of future life planning services including Wills, Trusts, LPA’s and Inheritance Tax Planning to help protect both you and your family’s future.

COmE ANd SING!

bY rIChArd ALLUm

The Shopwyke Singers is a chamber choir based at Westbourne house School on the outskirts of Chichester. Founded in 1994 by the school’s director of music, Alex dichmont, the choir was originally formed from the parent body at the school, some of whom still sing with the group. Over the years, membership has widened from across the local area, and the choir currently numbers nearly thirty singers who perform twice a year in the beautiful surroundings of boxgrove priory. Alongside performances, there are a number of social events throughout the year, including a ‘Come and Sing’ afternoon and a ramble followed by a pub lunch.

The choir are busily preparing for their next concert, which takes place on Sunday 21st May, where they will perform haydn’s mass in time of War and mendelssohn’s hymn of praise, accompanied by organist matthew Cooke. Tickets are available on 01243 572322 or via the choir’s website: www. shopwykesingers.com

The choir’s repertoire is broad, ranging from the renaissance to the present day, and although it is mostly sacred there are occasions when the choir sings more light-hearted, secular music. rehearsals take place on a Tuesday evening during term time, from 7.30pm-9.30pm at the school’s millennium hall. membership is open to anyone with a love of music, and although the ability to read music is an advantage, it is not a necessity. If you are interested in joining, please get in touch with Alex dichmont on 01243 770756. All welcome!