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What are the inheritance laws in the UK?
Inheritance tax might seem complex, but it needn’t be daunting.
Here’s our guide on how inheritance tax works…
What are the inheritance laws in the UK?
Put simply, inheritance tax must be paid after death, on the distribution of someone’s estate. An estate is any asset, from property and money to possessions.
Inheritance law – and consequently inheritance tax – applies to all official UK citizens, whether they were born here or were originally from overseas.
Who has to pay inheritance tax?
Inheritance tax is paid by funds from the estate. Inheritance tax is paid to HM Revenue and Customs and is organised by the executor/s of the Will. Beneficiaries are not responsible, as it is already deducted prior to distribution.
How much inheritance tax is due?
As probate and Wills experts, we are often asked ‘how much inheritance tax do I need to pay?’
The inheritance tax rate varies and is based on the total value of the estate:
- Estate value up to £325,000 – nil-rate band, or tax-free threshold
If the total value of the estate is below £325,000, there will be no inheritance tax to pay.
In addition, if everything above the £325,000 threshold is left to a surviving spouse or civil partner, charity or community sports club there is no tax to pay.
If a home is passed to biological, adopted, foster or step-children or grandchildren, the tax-free threshold can rise to £500,000.
- Estate value above £325,001 – a standard rate of 40% is payable on everything above the threshold of £325,001.
Example: an estate is valued at £750,000
£750,000 – £325,000 (tax-free threshold) = £425,000
Inheritance tax = 40% of £425,000 = £170,000
For a quick calculation, visit the HMRC Inheritance Tax calculator. To find out more about reliefs and exemptions, contact us.
When did British inheritance laws change?
Certain laws, simplifying what happens when someone dies without leaving a Will – or “intestate”- came into effect in October 2014.
The changes were designed to speed up and modernise the process of dividing the money, property and other assets of someone when they have died intestate.
The reforms made the process easier to manage for loved ones and beneficiaries of the deceased.
The reformed Inheritance and Trustees’ Powers Act 2014 includes:
- When someone who has no children dies intestate, their whole estate will automatically pass to their spouse. Before the changes, a complicated set of rules had been used which, in some circumstances, allocated parts of the estate to other members of the family
- When someone dies intestate and they do have children, the way their estate is split between their spouse and children has been simplified. This was previously subject to a complicated set of rules
- The changes closed a loophole to make sure children who are adopted don’t lose their inheritance after their parent’s death
The reform aimed to ensure that when someone dies, and they haven’t left a Will, their property will be dealt with sensibly and quickly. Effectively, the law was modernised to make administering an estate quicker and simpler.
Intestacy rule reform (England & Wales) in 2020
A large number of people die every year without having made a Will. As of February 2020, new rules on intestacy stated the following:
- Surviving spouse/civil partner and children
Spouse/partner receives the first £270,000 (up from £250,000) of the estate plus all personal possessions.
Half of the remainder goes to the spouse or partner. The rest is split between any children. The spouse or civil partner will inherit, even if the couple are informally separated or had not legally divorced at the time of death.
- Surviving spouse/civil partner and no children
Spouse/partner gets the entire estate, inheritance tax-free due to spousal exemption.
- No surviving spouse
The estate is distributed between any children or grandchildren. If there are no children or grandchildren, the estate passes to: surviving parents, siblings or nephews/nieces first. If none, then half-siblings, grandparents, uncles/aunts or cousins, half-siblings of parents or their children.
Here at Churchers, we encourage people of all ages to make a valid Will. If the worst happens, this ensures clarity for loved ones and peace of mind that your wishes have been honoured.
How to dispute a Will
We are frequently contacted by individuals who are disputing matters relating to a Will and the administration of an estate – this is known as ‘contentious probate’.
Contentious probate refers to any dispute about how a person’s estate is administered after their death.
Grounds for disputing a Will can include disagreement or concern about:
- the administration and distribution of an estate
- the validity of the Will
- ‘further provision’, e.g. if you feel the Will didn’t leave you what you deserve or were promised
- the mental capacity of the person when they made their Will
- the involvement of another person who may have interfered or influenced the Will
- suspected forgery or fraud
If you feel that a loved one’s estate is not being managed properly, and are wondering how to dispute a Will, we can help. Our team of Wills and probate solicitors will provide expert guidance in dealing with contentious matters.
To discuss the Will dispute process, visit our website or speak to a member of our dedicated team today.
Call the experts
Here at Churchers, we can offer a range of tailored advice and support, including:
- advice on how to dispute a Will and contentious probate
- assistance with making a tax-efficient Will
- support with forming a trust and inheritance tax planning
- guidance on Lasting Power of Attorney
To discuss how inheritance tax works for your specific circumstances, please call 01329 822 333 and speak to one of our experts today.
Alternatively, if you would prefer to email, one of our Wills and probate solicitors will get back to you as soon as possible.
