Inheritance tax?

[Old Salt]

Inheritance tax limit is £325000.

Does that mean that for the first £325,000, you only pay your regular tax? and anything over that is at the Inheritance tax level?

Of course Capital Gains tax can be a real devil.

I'm trying to get some knowledge before I meet with a solicitor about setting up a trust or some other financial package for my mentally handicapped son

Looking forward to any replies

Old Salt

[factor-fiction]

You pay no tax on the first £325000 of an inheritance.
(Of course you still pay regular tax on any income you receive.)

[buildersmate]

It is the estate of the deceased that pays the IHT based on the probate value. IHT gets paid to the Exchequer before any legatee receives any money. The first £325k is free of IHT, any probate value over that is taxed at a swingeing 40%. The first £325k is called the 'nil rate band'.
For a married couple leaving their estate to each other, the 'nil rate band' of the first to die can be transferred by the executors to the second to die such that the second can effectively leave £650k before any IHT is payable.
CGT is something different and is payable by an individual on a gain that it made from any investment or from property, but only when the investment is sold. The gain is the difference between what the asset was originally bought for versus what it sells for. There is an annual allowance which is free of CGT, then any gain over that is taxed at 18% of the net gain. The annual allowance for an individual is currently £10100.
Trusts are treated as an 'entity' even though they are not owned by an individual but are operated by trustees. The tax principles are similar but the tax rates are different for various sorts of income arising from the trust.

[Old Salt]

Thank you very much buildersmate,

That is the most easy and straightforward explanation I have ever heard. After all these years of ignorance, at last I can see 'basically' how it works.

However, I'm not looking forward to sitting down with the solicitor, creating something that will protect my son when I am gone, and at the end of the exercise, having something that I totally understand and have faith it will serve him as intended.

You and factor30 have been of great assistance.

OS

[jake-the-peg]

Note there are currently plans by the new Government to raise Capital gains tax to 40%

[Old Salt]

Now there's a surprise, jake-the-peg,

A government going to increase our taxation.

Thanks for the warning........... I missed that gem, hardly surprising with all the news coverage doubling our 'information overlaod'

OS