Online inheritance tax calculator allows people to calculate if they can pay reduced rates | Personal Finance | Finance

The calculator is especially useful to figure out if a person may qualify to pay inheritance tax at a reduced rate of 36 percent. This reduced rate is only applicable to those who leave at least 10 percent of their net estate to a charity in their will.

People can pay inheritance tax at a reduced rate of 36 percent in this case.

Also, the calculator can be used to work out the amount needed to qualify for reduced IHT rates in the event that a person is preparing their own will.

It can even be used by the executor of the deceased’s will or administrator of their estate if the death was after April 6, 2012.

The calculator is not available for use to those whose death was before April 6, 2012.

If a person’s IHT charges are from the deferral of tax for woodlands or heritage assets, they also cannot use the online tool.

Tax on woodlands or heritage taxes is always 40 percent.

If there is inheritance tax due on a trust and there has been no death, the calculator is not suitable for use.

To use the inheritance tax calculator, a person needs to know the value of the assets in the estate, how the assets are owned and the value of gifts the deceased made in the seven years prior to death.

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The value of any debts and liabilities that must be paid out of the estate, as well as the amount of any IHT relief and exemptions, and the amount of any charitable donations already made is also necessary information.

People do not have to pay tax on an estate as long as it is passed to the spouse or civil partner of the person who died, a charity or if its value is below the inheritance tax threshold of £325,000.

This means an individual can pass on assets up to the value of their nil-rate band without having to pay inheritance tax.

Heirs are required to pay tax out of the estate on its value above this threshold, currently at a rate of 40 percent.

This rate is only charged on the part of the estate that’s above the threshold.

The inheritance tax free residence nil-rate band came into effect in April 2017.

It began at £100,000 during the 2017 to 2018 tax year and has increased each tax year by £25,000.

In 2021, it reached £175,000.

The next increase was due this April this year, however it was announced in the 2021 Budget that inheritance tax thresholds will instead be frozen until 2026.

Gifting assets before a person dies can reduce how much inheritance tax will be due on their estate as long as it is made seven or more years before their death.

In this case, the recipient will not have to pay any IHT on the gifted estate.

If a person dies within seven years of making the gift, IHT may be incurred.

It will depend on the type and value of the gift.