Legal

Granny’s engagement ring shock

Research has shown that more than 4,000 bereaved families were investigated by HM Revenue & Customs in 2022 due to suspicions of underpaid death duties. This was up 28 per cent on the previous tax year.

21 Mar 2023

Team name
Manzurul Islam

Manzurul Islam

The research was contained in answers to a freedom of information request by insurer NFU Mutual and show that an estimated 684 additional families were investigated in the last tax year compared with the one before.

Inheritance tax is the tax payable on your net wealth after you pass away. The inheritance tax-free threshold is currently £325,000.

In general terms everyone has a personal inheritance tax-free allowance of £325,000 below which no tax is due.  If, after your debts and liabilities have been settled, your net wealth is over £325,000 you will usually have to pay inheritance tax at a rate of 40% for all wealth over the threshold.  However, this is a starting point and some estates may be able to pass on more wealth tax-free.

One area of confusion between HMRC and families can be gifts.  Gifts to a spouse or civil partner can be made completely free of inheritance tax.  They can also share their inheritance tax-free allowance. This means that when the last surviving spouse or civil partner passes away, they may be able to pass up to £650,000 before inheritance needs to be paid.

If there is a family home which is left in the Will to children or grandchildren, the total amount that can be gifted tax-free could be up to £1 million.

An investigation can take months, and even years to complete, as officials search for undisclosed assets. There is no limit on how long the taxman has to open an investigation. However, you will typically be told within three months of paying inheritance tax if you are facing investigation.

This article was written with information provided by the Daily Mail. Mullis & Peake are not responsible for the content of external websites: How granny’s diamond ring could land you with an inheritance tax shock | This is Money

M&P Commentary

Manzurul Islam, Head of Wills and Probate at Mullis & Peake, said:

“Inheritance can be complicated and there are lots of rules and exceptions, so it is always worth seeking expert advice. It is possible to plan your Will in a tax efficient way to reduce or eliminate the amount of inheritance tax your estate will pay. Early planning and advice could help you reduce or completely eliminate your inheritance tax liability, helping you to pass on more of your wealth to those who mean the most to you.”

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