The improvement to the inheritance tax rules means that Britons don’t need to report the value of an estate that is below the £325,000 threshold as long as they don’t need to apply for probate. HMRC claims it should make life easier for 230,000 people, already going through a difficult time after someone has passed away.
HMRC announced a big new rule change which came into effect at the beginning of the New Year and should remove administrative burdens for people dealing with inheritance tax.
The standard inheritance tax rate is 40 percent, paid by a person who inherits money or property from a person who has died, with some exceptions.
The good news is that from January 1, Britons will not have to report the value of an excepted estate if they’re not applying for probate.
However, for an estate to be excepted they must meet certain criteria.
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It’s not just property where people can be stung by a hefty inheritance tax bill.
HMRC has updated its guidance to help people avoid getting caught out if they plan on giving cash sums, property or assets to family members in 2022.
Its online tool checker is available on the HMRC website for people to work out how much IHT could be due.
However, the checker does not calculate the amount of IHT potentially owed and it might be advisable to speak to an independent financial adviser for clarification.
Britons are throwing away millions of pounds every year in inheritance tax which is easily avoided if they brush up on the rules.
In 2020, the UK gave away £125million in unnecessary inheritance tax through “gifts gone wrong”.
That works out at a quarter of a million each.
Before giving cash this year, Britons should check whether they could carry a tax allowance over from last year.