What is Inheritance Tax (IHT) and do I have to pay it?

Makinson December 2020 blog - Inheritance tax

Inheritance tax is a tax on the estate of someone who has passed away. Their estate includes all property, possessions and money.

This can result in your loved ones paying hundreds of thousands in tax when you die. However, there are ways you can mitigate this if you plan correctly. How much is paid depends entirely on the value of your assets as well as other factors.

Assets include:

  • Cash in the bank
  • Investments
  • Property
  • Businesses
  • Vehicles
  • Life Insurance policies

A helpful guide on what Inheritance Tax is can be found below.

Who must pay Inheritance Tax?

There is usually no tax to pay if:

  • The total value of your estate is below the nil rate band of £325,000 or
  • You leave everything above this threshold to your spouse or civil partner or
  • You leave everything above this threshold to an exempt beneficiary e.g., a charity

 If none of the above applies, then your beneficiaries will be taxed at 40% on anything above £325,000. However, the threshold may be higher depending on individual circumstances – which we will explain more of below.

What if my spouse is deceased?

If you will not be passing your estate to your spouse because unfortunately, they have passed away, then you will have their NRB (nil rate band) allowanced added onto yours. This means you have a IHT free allowance of £650,000.

What if I own my home?

For homeowners there is another allowance called the residence nil rate band. This is commonly referred to as ‘main residence band’. To access this, you need to leave your main property to a direct descendant.

Who classes as a direct descendant:

  • Children and their spouses or civil partners
  • Grandchildren and their spouses or civil partners
  • Stepchildren
  • Adopted Children
  • Foster Children
  • Children who were under the guardianship of the people passing on their estate.

However, if your total estate is worth the £2 million, the additional allowance tapers off. Falling by £1 for each £2 above the threshold.

If you are married, you have double the residence nil rate band allowance. This means that from April of this year (2020) you can pass on as much as £500,000 tax-free, or £1m if you are married.

More information on properties and IHT can be found here.

Are there any exemptions from IHT?

Yes, if the person who dies in active service then they are exempt from inheritance tax. Included in this are:

  • Armed forces personnel
  • Police
  • Firefighters
  • Paramedics
  • Humanitarian Aid Workers

What other ways can I reduce my tax bill?

Here are some ways you can look to reduce your inheritance tax bill:

  • Regularly giving away up to £3,000 a year in gifts
  • Putting your assets into a trust for your heirs
  • Leaving a legacy to charity (gifting a tenth of your wealth to charity reduces your tax to 36%)
  • Leaving your estate to your spouse of civil partner
  • Paying into a pension instead of a savings account

NOTE: If you do not give away £3,000 in one year, you can pass this over for one tax year only.
Also, if you wish to gift more than £3,000, you can do this but you must survive 7 years past the date of the gift for it to be exempt from IHT.

Did you know?

Wedding gifts can be inheritance tax-free. A parent can gift £5,000, a grandparent £2,500 and £1,000 from anyone else.

How much inheritance tax will I pay?

Which have provided a calculator which you can use to find out.

For more information on IHT and other taxes your beneficiaries may be subject to when you die, give us a call today and we can help.

01594 842 188

What are the latest grants available to businesses during local restrictions?

Makinson november blog - support grant

As the latest national lockdown comes to an end, we are all preparing to go back into the Tier system. With this the new Local Restrictions Support Grant has been announced to be applicable from 2nd December. This grant provides funding to businesses based on how many days they will be closed for. It is also important to note that it will be awarded by local councils and authorities. Below we have outlined what each section of the grant involves and who they apply to:

Local Restrictions Support Grant (Closed)

This grant is for businesses that will be required to close under the Tier 3 restrictions (Local COVID Alert ‘Very High’). Funding of up to £3,000 will be available per 28-day period that the business will have to be closed.

The amount of funding that you will receive will be based on the rateable value of your property. If the value of your business’ property is less than £15,000 you could be eligible for a £667 cash grant for each 14-day period that your business is closed for.

If your business property’s rateable value is over £15,000 and less than £51,000, the cash grant that you could be eligible for is £1,000. And if your property’s rateable value is £51,000 or above you could be eligible for a cash grant of £1,500.

Local Restrictions Support Grant (Open)

This version of the grant is available to businesses that have not had to close but that have been severely impacted by the local restrictions in place in Tier 2 and Tier 3 areas.

Local councils will determine if you are eligible to receive this grant. If you are, the amount that you will receive will be based on the rateable value of your property, similar to LRSG (Closed).

If your rateable value is of £15,00 or less, you could be eligible for a cash grant of up to £467 for each 14 day period that you were affected for.

If your business has property with a rateable value of more than £15,000 and below £51,000, you could be eligible for a cash grant of up to £700 per 14-day period. And if your business property has a rateable value of £51,000 or more you could be eligible for up to £1,050 in the form of a cash grant for each 14-day period.

This information covers the two main parts of the grant that is available and is applicable from 2nd December 2020 onwards. You can find more information released by the Government on their Local Restrictions Support Grant webpage.

We hope that it helps you to understand what is available and if you have any questions about your business finances and what financial aid you might be eligible for, get in touch with us at Makinson & Co and we would be more than happy to help.

Changes to the Furlough Scheme this September

The Furlough Job Retention Scheme is changing this month as businesses will need to pay towards the wages of staff on furlough as of the 1st September 2020.

The government will be reducing their contributions from 80% to 70% of an employee’s wage up to the value of £2,187.50 a month. Employers will need to pay the 10% difference.

Since 1st August 2020, employers have also had to pay National Insurance Contributions and pension contributions for staff.

Did you know Employees are required to pay tax, National Insurance and pension contributions on the money they receive through the furlough scheme?

From October, the scheme will change again, with only 60% of the wage being funded by the government and a new law has been introduced regarding redundancy pay, meaning redundancy will not be based upon furloughed wages but full earnings.

An estimated 1.14 million employers have benefited from the furlough scheme that has so far cost the government over £34 billion. For employers there have been benefits – payments of £1,000 will be made for each member of staff who remains employed from November 2020 to the end of January 2021.

Eat out to help out

The world has started to open up, which has seen restaurants re-opening; our hungry bellies rejoice! With restaurants facing hard times throughout the coronavirus pandemic, the government have launched the ‘Eat Out to Help Out’ scheme.

What does it involve?

As it is looking to give the food industry a much-needed boost, the government have worked with traders to provide incentives to get the economy moving. These include:

  • 50% off when eating at restaurants: sit down meals and non-alcoholic drinks are included in this. The total amount the bill can be reduced is £10 per person.
  • You’ll be able to get the discount at a variety of restaurants, cafes and pubs at a range of different locations. You can use this tool as of the 20th July to see where is participating near you!
  • Outlets which opt to participate in the scheme will need to apply the discount across their menus on top of any pre-existing offers or vouchers.

Use the Finder Tool to find food near you that are taking part in the eat out to help out scheme.

The 50% discount runs from the 3rd of August and throughout the month and the discount will be applied automatically when you pay, making it nice and simple!

Takeaways are sadly not included but take this as an opportunity to get out in the open and enjoy a delicious sit-down meal.

What you need to know about the coronavirus job retention scheme – Key Dates

At Makinson and co, we are here to help! During this troubling time, we want to make sure you know what is going on and what you need to know about the coronavirus job retention scheme that the UK government have put in place.

There are several key dates that you as an employer or employee need to be aware of.

June 10, 2020 is the last date that furloughed employees can be put on furlough for the first time to be eligible for the scheme until October 2020.

June 12, 2020 as of this date the guidance on the changes to the coronavirus job retention scheme will be available on GOV.UK

June 30, 2020 the coronavirus job retention scheme will not be available to anyone who has not been furloughed for three weeks before this date.

July 1, 2020 flexible furloughing will begin meaning businesses will be able to bring back employees as and when needed. The coronavirus job retention scheme grant will cover usual hours that are not worked by the employee.

July 31, 2020 this is the final date that employers will be able to submit claims for staff that have been furloughed before the June 30th, 2020.

August 1, 2020 employers will now pay national insurance contributions as well as pension contributions for all furloughed employees.

September 1, 2020 from the state employees will have to pay 10% of furloughed employees wages plus the national insurance and pension contributions.

October 1, 2020 employers will now pay 20% of furloughed wages and national insurance and pension contributions.

October 31, 2020 the coronavirus job retention scheme ends.

For more information on the scheme please click here.