Inheritance Tax Valuations Scotland
When someone dies, their entire estate (home, property, money, possessions, and certain gifts made in their lifetime) is considered and taxed before being passed on/inherited by someone else, a spouse, or family member, person or entity as outlined in the person’s will. It is essential to have these taxes calculated properly before any beneficiaries are paid out. In most cases, the home and any other owned properties make up the largest portion of the estate.
How Shepherd’s Can Help with Inheritance Tax
The winding-up of an estate of a client who has passed away often requires inheritance tax criteria to be met, which includes ascertaining the worth of the deceased’s property. Once the estate is settled and if the house is to be sold, we can then conduct the home report to ascertain an accurate valuation.
Our team comprises former staff members of the valuation office agency, who possess an in-depth understanding of the process, the people involved and the tolerances to which they work. This means we can provide an accurate valuation of the property at the relevant date and work with you to reduce your tax liability.
Inheritance Tax Thresholds
When it comes to paying inheritance tax, as a general rule, it’s only due if the total value of the deceased’s estate is more than £325,000. That means that up to £325,000 is free from inheritance tax (the nil-rate band). This is planned to continue up until the 5th of April 2026. However, estates over this value will be subject to inheritance tax at 40%.
The threshold changes however if you give away your home to your children (including adopted, foster or stepchildren) or grandchildren. This makes your threshold increase to £500,000.
If you’re married or in a civil partnership and your estate is worth less than your threshold, any unused threshold can be added to your partner’s threshold when you die. This means their threshold can be as much as £1 million meaning in most cases passing on the main property tax-free can be explored.
If 10% of an estate is left to charity inheritance tax can be paid at a reduced rate.
How to Avoid Inheritance Tax with Reliefs and Exemptions
There are several ways to reduce an inheritance tax liability on properties and estates worth more than £325,000 with reliefs and exemptions. With future planning today, many of these can be achieved relatively simply.
To Your Spouse/Partner
Anything including the home that passes to a surviving spouse or civil partner are entirely free of inheritance tax, no matter the value.
In April 2017, an additional tax allowance on top of the nil rate band was introduced. This gives homeowners an extra £175,000 tax allowance – on top of the first £325,000 – to £500,000 if they leave their home to their children, stepchildren or grandchildren. If married, this increases to £1 million. This also applies to other direct descendants including great grandchildren and additionally adopted children and foster children. However, this means that nephews, nieces, siblings, and other relatives will not benefit from the new allowance if a home is passed on to them. The entire estate must be worth less than £2 million, however.
You can give gifts while you are still alive to reduce the amount of inheritance tax. Depending on who you leave a gift to, and what the gift is, there are several allowances to be aware of.
For instance, if you gift your property to your children while you are still alive, which is perfectly fine to do, you can’t continue to reside in it, otherwise, it is not considered a gift. It must also be done at the market value, for any perceived ‘discount’ is also treated as a gift with further considerations.
Generally, gifts must be made seven years before your death also.
There are many considerations when gifting to reduce inheritance tax, and, many ways it can fail to properly meet the criteria of a gift, so we recommend seeking professional advice beforehand.
Learn More about Inheritance Tax Valuations
There are many things to consider when dealing with inheritance tax. It can be a very complex and overwhelming situation. Our tax valuation specialists offer a very personal service to help relieve the pressure and give the necessary advice. To discuss your specific requirements, or to instruct a valuation on a home or properties, please contact a member of the Shepherd’s valuation team today.
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