Estate

The estate is the wealth left behind by someone after they die, including everything from property and possessions to businesses and cash and beyond. It is then split between the beneficiaries listed in the will of the deceased. Depending on the value of the estate, the beneficiaries may need to pay Inheritance Tax.

What is the taxable value of an estate?

As we said, an estate can include things like property, land, cash, shares, jewellery, works of art, vintage cars etc. And in the same vein, debts are also carried over. They are deducted from the value of the estate after you die. Examples include:

  • Credit card debt
  • Debit card debt
  • A mortgage
  • Equity release

Debts such as these reduce the value of the estate for Inheritance Tax purposes.

When do I pay Inheritance Tax?

Beneficiaries of an estate don’t need to pay any Inheritance Tax in the following scenarios:

  • If the value of your estate is less than the £325,000 threshold (or £500,000 if you give away your home to children). This threshold can further increase to £1,000,000 for married couples or civil partners
  • If you leave everything above the £325,000 threshold to your spouse, civil partner, a charity, or a community amateur club

How to calculate the taxable value when someone dies

Take a look at the below example to calculate Inheritance Tax on an estate worth £400,000.

  • The deceased’s house is worth £400,000, and there are no other assets
  • There is an outstanding mortgage of £150,000
  • The estate’s value for IHT purposes is £250,000 – (£400,000 – £150,000)

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