Why Do We Pay Inheritance Tax?
Inheritance tax is the sum of money that you pay if your estate exceeds a minimum threshold. This tax is surrounded by controversy because the theoretical basis as for why we pay this tax in the first place is said to be seen as dubious in the grand scheme of things.
History Of The Inheritance Tax
Firstly, the inheritance tax was introduced to the UK in 1796, which stemmed from the end of the French Revolution. The concept of the inheritance tax was introduced in order to protect poor members of society and interrupt the legacy of inherited wealth. In 2010 further changes to inheritance tax were made, increasing the threshold to come into line with rising house prices.
In the recent history of this tax includes the introduction of Capital Transfer Tax in 1975, which was renamed to the current 'Inheritance Tax' in 1986. In 2007 changes were made to the process of leaving money to your partner. In the past years, the system effectively cancelled out one partner’s tax free allowance if they left it their partner. It meant that between both of you, you only had the tax free allowance threshold, whereas two single people would have that allowance as individuals. This has been changed so are both entitled to your tax-free allowance. This means that if you are the remaining partner, you in effect get double the amount of tax-free allowance if your partner leaves all their estate to you.
You can now leave £325,000 tax free. Anything over this will be taxed at a rate of 40%, or 36% if you donate at least 10% to charity. In addition, the threshold has been frozen for the next four years meaning it will effectively reduce because of inflation. In the past, it had fluctuated year by year, so Inheritance Tax has in simple terms been reduced in recent times.
Rory Mack Associates are a team of fully qualified commercial estate agents. Our Chartered Surveyors can provide you or your advisers with the relevant report for all types of residential and commercial properties. You should note that any fees associated with formal valuation advice can be offset against the value of the estate. Be sure to give us a call on 01782 7157125 for a friendly chat with one of our team! Or why not send us an email?