Married couples and registered civil partners can effectively increase the threshold on their estate when the second of them dies – to a maximum of 650,000 in 2011/12. Their personal representatives must claim the unused Inheritance Tax threshold or “nil rate band” of the first spouse or civil partner so that it is available to set against the estate of the second spouse or civil partner taxai.
Who is responsible for paying the tax?
Inheritance Tax is payable by different people in different circumstances. Usually, personal representatives pay it using funds from the estate of the deceased. Trustees are usually responsible for paying Inheritance Tax on assets in, or transferred into, a Trust. Sometimes people who have received gifts, or who inherit from the deceased, have to pay the Tax – but this is not common.
How do I find out if Inheritance Tax is payable?
To find out if the Tax is due on an estate, you must first value the estate. i.e. calculate the value of all assets owned at the date of death – including any property, possessions, money and investments – and deduct any debts owed, including household bills and funeral expenses.
The estate also includes the deceased’s share of any jointly owned assets and the value of any assets held in a trust from which they were entitled to income.
Any gifts that the deceased may have made in their lifetime should be reviewed to see if they are exempt and, if not, they must be included in the overall value of the estate.
What exemptions and reliefs are there?
Sometimes, even if your estate is over the threshold, you can pass on assets without having to pay the tax. Exemptions and reliefs include:-
* Spouse or civil partner exemption – your estate usually doesn’t owe the Tax on anything you leave to a spouse or civil partner who has their permanent home in the UK – nor on gifts you make to them in your lifetime – even if the amount is over the threshold.
* Charity exemption – any gifts you make to a “qualifyin