Inheritance Tax Calculator

How much inheritance will you pay?

Please note that the online tax calculators may not look right on a mobile device. You are recommended to view the tax calculators on a desktop/laptop

The HMRC inheritance tax is what you pay on death. More to the point, the tax liability will be paid by your executor, who looks after your assets. The IHT400 form tells HMRC how much IHT is to be paid.

You must send the IHT400 HMRC form within 12 months of death. Failure to file and pay Inheritance Tax on time will result in interest being chargeable after six months.

It is possible to negotiate with HMRC when inheritance tax needs to be paid depending on the type of assets held. This is because certain assets, such as property investments, are not liquid and cannot be sold immediately to pay the tax liability

You typically pay HMRC 40% tax on your net assets. Calculating IHT carefully is vital, so you do not underpay or overpay IHT to HMRC. Our free online inheritance tax calculator will help you with some essential tax planning.

IHT Calculation

Each person is provided with a nil rate band for IHT purposes of £325,000. A husband/wife or civil partnership would benefit from an IHT lifetime allowance of £650,000 as they each get the £325,000.

The government also introduced a Residence Nil Rate Band (RNRB) in April, helping to protect the main home asset by another £175,000.

This means that someone with a high valued home would benefit from the £325,000 Inheritance lifetime Allowance and the Residence Nil Rate Band of £175,000, giving rise to a tax-free amount of £500,000.

I’m advising investors that couples can also pool their allowances, meaning they could leave a total of £1m before any inheritance tax is due.

You need to add up your market value assets, such as

– Property (homes and investments)

– Shares

– Bank accounts

– Cars

– Art

Once you add up these asset types, it will give you a gross asset value.

To calculate IHT, you decrease the above gross asset values by your liabilities, such as:

– Mortgages

– Loans

– Credit cards

Your IHT calculation will involve you adding your gross assets, as shown above, less the liabilities. This simple calculation will provide you with a net asset value for the IHT calculation.

Your inheritance tax lifetime allowances will decrease the net assets by up to £1 million, as described above.

The remaining asset value will be subject to an inheritance tax charge of 40%.

Our IHT tax calculator will help you understand how assets and liabilities affect your potential inheritance tax liability.

IHT Exemptions

Some assets are not taken into consideration when calculating inheritance tax:

– Agricultural assets

– Trade business assets

– Money invested in pensions

– Amounts given to charity

You must speak with an inheritance tax specialist when planning. We have created an online IHT calculator to help you identify these assets, which will not be subject to inheritance tax.

See if you can sell/transfer assets from IHT chargeable amounts to exempt amounts is essential. An example is selling residential property investments and investing money into pensions. You might pay Capital Gains Tax, but this might be less than 40% inheritance tax.

Use our online IHT calculator to see how you can save on inheritance tax.

Three things you must get done regarding IHT

– Make a Will and ensure that it specifies people by their name(s) and the specific assets to be transferred to them

– Use your lifetime transfer allowance as stated above in ways to mitigate CGT & IHT

– Create an investment structure that pays any IHT liabilities without the need to dispose of any assets

Wills & executors/administration of your estate

Typically, the next of kin will act as the administrator of the Will to ensure that your wishes are carried out correctly. They are known as the executors.

Collectively, executors and administrators of a Will are called personal representatives. They will be responsible to:

– Administer the estate

– Collect unpaid debts

– Pay any tax due

Before you jump to someone’s aid as a personal representative, you need to know that you would be liable for any unpaid debts and tax due. Personal representatives will need to ensure that these are paid before any distributions are made in accordance

Personal representatives must ensure that liabilities are paid before the Will makes any distributions.

Grant of representation

A grant of representation needs to be obtained by the executors of the Will, which will then allow them to administer the Will if the assets left are worth more than £5,000.

This will be done after they have completed an HMRC form to show the assets and liabilities of the deceased.

Use our free inheritance tax calculator

Please use our free online Inheritance Tax Calculator. It will guide you on the IHT tax liability that may be faced now and in years to come. I hope you can do some tax planning to mitigate inheritance tax before it must be paid to HMRC.

Please note that Optimise Accountants cannot be held for the numbers you enter into the online inheritance tax calculator. Optimise Accountants cannot be held responsible for the numbers produced or the decisions made based on the outputs of the inheritance tax calculator.

Please note that the online tax calculators may not look right on a mobile device. You are recommended to view the tax calculators on a desktop/laptop