When producing a will, one of the most important factors to consider is the Inheritance Tax Law. IHT or Inheritance Tax is a type of tax that is payable on a person’s estate when they die. These include:
Your home
Jewellery
Savings and Investments
Works of Art
Cars
Properties and Land
While most of the time the tax become payable on death, sometimes it has to be paid earlier than that.
Upon death any assets that you have accumulated become known as your “estate”. Any estate left left to your partner or spouse is exempt from IHT. The only exception to that rule is if your partner/spouse live outside Scotland or the UK.
The tax applies at a rate of 40% on amounts above the estate tax threshold. At the moment this threshold is £325,000. If your estate is worth more than that, the tax will be at the standard rate of 40%.
In order to check that the threshold has been reached upon the person’s death, HM Revenues & Customs will look at the value of the estate, taking into consideration any assets that have been transferred seven years before the death. Be advised that the value of your property is usually included within the value of the estate and it is not unusual for the estate to exceed the threshold amount of £325,000.
The inheritance tax requirements are as follows:
If you are domiciled in Scotland/UK, you have to pay IHT on your assets worldwide
If you are domiciled outside the UK, you only pay IHT on your UK assets
Your country of domicile is the place you consider your home and where you are planning to reside in the foreseeable future.
Although you may not reside in the UK, you may considered domiciled for tax purposes which would make you liable for IHT. The law states that you can be considered domiciled in the UK if:
You have been resident in the UK after 9th of December 1974 and UK resident in at least 17 of the 20 tax years up to and including the year of the transfer of the assets or death; or
You were UK domiciled after 9th of December 1974 and, within three years before the transfer of the assets or death
Domicile is a key component in determining whether you are liable for inheritance tax. If you are not completely sure about aspects of domicile laws, consult your solicitor or legal adviser.
Similar Posts:
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- Probate Valuation Of Chattels: Wills and Taxation (Part 1)
- Probate Valuation Of Chattels: Inheritance Tax Forms To Use?
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