Home Accountant Why you need proper advice on inheritance tax

Why you need proper advice on inheritance tax

5 min read
Comments Off on Why you need proper advice on inheritance tax
0
65

Inheritance tax explained

Accountants are warning people to make sure they get proper advice on inheritance tax to avoid fines which could run into tens of thousands of pounds.

As property prices rise, more and more people are leaving estates which are liable for inheritance tax – and HMRC is keeping a close eye on things to make sure people are paying what they owe.

The latest figures show that in 2017/18, HMRC received 1,300 more inheritance tax returns than the year before – an increase of around five per cent. This is partly because although house prices are going up, the threshold for paying inheritance tax has stayed the same.

HMRC investigates around one in five inheritance tax returns – in 2017/18 it investigated 5,400 out of a total of 24,500, compared with 5,100 out of 23,200 the year before.

And if you haven’t paid enough tax, you won’t only have to pay the tax you owe, you might have to pay the same amount on top as a penalty. There have even been cases where people have

been jailed.

Fortunately, inheritance tax is not necessarily complicated, and your accountants will understand how it all works and make sure everything is done properly.

What is inheritance tax?

Inheritance tax is a tax on the estate – the property, money and possessions – of someone who has died.

There’s normally nothing to pay if someone’s estate is worth less than £325,000, or if it’s just passed to their husband, wife or civil partner. If someone leaves their home to their children, including adopted, foster or stepchildren, or their grandchildren, this threshold can increase to £450,000 (the estate still has to be reported to HMRC though).

Many people outside London who don’t have a lot of savings will therefore be exempt – the average cost of a UK home outside the capital is £245,076. But in London, the average home now costs an enormous £476,752.

Once you get over the inheritance tax threshold, it’s charged at 40 per cent on the part of the estate that’s above the threshold. So if someone’s estate is worth £500,000, for example, and they leave their home to their children, only the top £50,000 will be liable for inheritance tax. However at 40 per cent, that’s still a bill of £20,000.

So far, so expensive. But there are ways to reduce your bill – for example, you can claim business relief on business assets, or agricultural relief on agricultural land, or money can be left to charity.

The things that HMRC are likely to check include whether a claim for relief is valid, whether a property has been undervalued, and whether there are any other assets that haven’t been declared – whether deliberately or not. If a property has the potential to be significantly refurbished, or comes with land that could be developed, HMRC might argue that its value should be increased.

Although the penalties for deliberately being untruthful are worse than those for careless but genuine errors, both are punishable – which is why, if you have the slightest doubts or concerns, it’s advisable to get an accountant to help you. They are much less costly than an investigation could turn out to be.

Load More Related Articles
Load More By Sophia Jackson
Load More In Accountant
Comments are closed.

Check Also

Arborist – Make the Best Out of It

If you are looking to preserve a specific tree in the construction location then you can v…