Inheritance tax question?

Question

How much is inheritance tax in the UK? Is it 40% or something?

And, I know you don't have to pay taxes if you are under 16 or are a full-time student, but does this also apply to inheritance tax? Or does everyone have to pay it, no-matter how young they are?

Answer 1

This link sets out the details about Inheritance Tax. It has nothing to do with income tax and is levied against a person's estate. It is not payable for the value of the entire estate, but only for what is left after applying the exemption. As you will see, the current exemption is £312,000, after which it is taxed at 40%. http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/InheritanceTaxEstatesAndTrusts/DG_4016736



I have a feeling that your chief concern is lifetime gifts. If a person were to give you a large sum of money and then survived for seven years, no tax would be payable on the gift by you or estate of the person concerned. If the person died within seven years of making the gift, a sliding scale would apply in calculating how much of it was exempt from tax, so that the closer to the seven year period he survived, the less tax would be payable. Again, the tax would be payable not by you, but by the estate.

Answer 2

S C's answer is spot on.



Can I just correct one thing? Under-16s and fulltime students do have to pay income tax if they earn more than the personal allowance of £6035.



I know that not many do, but there is no exemption from income tax for the young.

Answer 3

The deceased persons ESTATE is taxed if funds exceed the current limit of £300,000. Any excess over this taxed at 40%.



Eg Somebody leaving £400,000 would be taxed at 40% on the £100,000 excess, therefore a tax bill of £40,000.



This would leave £360,000 to split according to the will



You are not personally taxed on the amount you then receive

Answer 4

Yes - unless you live in it for a while before you sell it. This makes it your main home, on which there is no capital gains tax. Even if you don't live in it before selling, you will have to calculate the capital gain. At this point you can deduct evry penny you have spent on the house since it became yours, so I hope you've been keeping receipts, especially for big items like refurbishment or extensions, legal fees, local council fees for planning permission or building inspection, repairs, etc etc

Answer 5

In the US the estate pays the inheritance tax before the proceeds are disbursed.