Intro to inheritance tax

Planning
ahead for
inheritance
tax

Want peace of mind over
your family’s future?

Like most of us, you’ll no doubt want the best for your loved ones.
This includes making sure they’re financially set up in the future.

That’s why it’s really important to look into things like inheritance tax.
In this easy-to-read guide, we give an insight into what inheritance tax is, how it
works, and ways our financial advice service could help. But before we do, you
may be thinking – would inheritance tax even affect my estate and my family?
This is something we could find out for you – and if you’re affected, don’t worry.
We’ll discuss the steps you could take now to start protecting as much of your
family’s inheritance, as possible.

02

A growing issue

Many years ago, only the very wealthy had to pay inheritance tax. Nowadays,
this is no longer the case – with many families in the UK paying billions of
pounds in inheritance tax each year.
In fact, mainly due to soaring house prices, the figure has climbed every single
year over the past decade.

In 2009/10, £2.4 billion was taken, compared
to a staggering £5.3 billion collected over
2020/21*.
And the amount is expected to rise even further
over the next few years**.

*Statista, March 2022. **Office for Budget Responsibility, March 2022.

03

What’s inheritance tax
and who pays it?

Whether you’re affected by inheritance tax all depends on the value of
your overall estate. If, upon your death, your estate is worth more than the
inheritance tax nil rate bands, anything above this is usually subject to up
to 40% inheritance tax.
Executors of the estate are left to pay the bill – these are usually the
beneficiaries. The bill can typically amount to tens of thousands of pounds
– and must be settled within six months, before your loved ones can receive
their inheritance. If it isn’t, HMRC may start charging interest.

04

The nil rate bands

If you’re single or divorced, your nil rate band is currently
£325,000. While married couples, civil partners, and widowers
have a nil rate band of up to £650,000.

These nil rate bands have stayed the same since 2009/10, and are set to
remain frozen until 2026 – another reason for the predicted rise in inheritance
tax revenue.

As well as these thresholds, you’ll also have an additional allowance – known
as the residence nil rate band. This could allow you to pass on your home
tax-free. But certain restrictions mean not everyone will benefit from this
(we explain more on page six).

Your estate isn’t just your home

It’s pretty much everything you own – your savings, investments, cars, and
other properties like buy-to-lets or holiday homes. It even includes your
jewellery, home furnishings, and valuable paintings. (To work out the final
figure, you’ll need to deduct any liabilities you have – such as your mortgage
or credit card debts.)

So, after adding your entire estate together, you might be surprised by
how much it’s worth. Your house price alone could even take you over the
threshold. If you don’t feel comfortable working out your estate value, don’t
worry – we could do this with you.

Please note asset values and nil rate bands could change over time.

05

Could you miss out on the
residence nil rate band?

To help families even further with inheritance tax, the
residence nil rate band (RNRB) was introduced in 2017.
Currently, the amount is £175,000 per person (until at least
April 2026) – so if you’re in a married couple or civil
partnership, the figure is £350,000.

This sounds relatively simple. But the rules around the RNRB may
appear confusing to many and are often misunderstood. For instance,
there are a number of restrictions to bear in mind, which mean not
everyone can benefit from it. That’s why it’s important to get advice
from someone in the know.

Here are just three restrictions;

1. The RNRB only applies to a property you’ve lived in at some point
– excluding buy-to-lets and holiday homes.

2. You can only leave your home to a direct descendant – such as
your child, grandchild, as well as your step or adopted child. But if
you want to pass it to your nephew or close friend, this allowance
won’t be available.

3. Although married partners can claim any unused allowance (upon
the death of a spouse), if you’re not married, it can’t be transferred.
Even if you have a child together.

Getting to grips with these rules around the RNRB is crucial – and
could save you tens of thousands of pounds in inheritance tax. We
could help you develop a greater understanding of how it works –
and help you put suitable plans in place to reduce your potential
inheritance tax liability.

06

Tackling inheritance tax

Unlike many other taxes, the great thing about inheritance tax is that you
could do something about it. There are a number of solutions available –
to help you reduce as much of your potential liability, as possible.
Some of these can be complicated, which is why it could make sense to
speak to one of our Financial Advisers as soon as you can. Our experts
could take you through each possible solution – and help you work out
the right options for you.
Turn over to find out more about some of the potential solutions.

07

Some of the solutions

A will

This is potentially one of the most effective and convenient ways to
minimise your inheritance tax liability. Simply because you can make
plans as to how your assets are distributed to the right people.

Gifts allowances

There are a range of gift allowances available, which allow you to
gift your money to loved ones – free from inheritance tax.
These include the annual gift allowance, marriage (or Civil
Partnership) exemptions, small gift exemptions, charitable donation
exemptions, and gifts out of normal income.

Bigger, non-exempt gifts

You also have the option to give away even bigger, potentially
tax-free financial gifts. For your loved ones to receive the gift free
from inheritance tax, you’d need to survive at least seven years from
the date of the gift. So, the earlier you make these gifts, the better.

Gifts into trust

For a few reasons, you might not want your beneficiary to receive
a gift straight away. If that’s the case, trust planning could be a more
suitable option. There are a range of trusts to choose from, each
with their own pros and cons.
These enable you to place your money in a suitable investment –
which is then wrapped in a trust.

Life insurance

Another option is to insure your potential liability. By taking out
life insurance, you may be able to cover the cost of the tax bill your
family might have to pay in the future. There are a number of life
insurance policies to choose from, such as Whole of Life or Level
Term Assurance.

08

Here to help you

Inheritance tax is one of the most complicated areas of
financial advice. That’s why it’s highly recommended you
seek professional help.
Doing so could help you stay ahead of the game – and
give you greater peace of mind over your family’s future.

Through our inheritance tax planning service we could help you
find out if inheritance tax is something your family may have to pay
in the future – and help you work out your potential liability, both
now and later on.

09

It’s all about you

We appreciate everyone’s unique. We’ll take the time to get to know
you – and provide recommendations that are right for you and your
personal needs.
To give you the right level of help, we offer a range of advice
services at different costs, tailored to you.

Our no pressure promise

Upon hearing our recommendations, we promise there’s
no pressure to take our advice. And we’ll give you the
time you need to decide what’s right for you.

It costs nothing to hear our recommendations

You’ll only have to pay a charge if you wish to go ahead with a
recommendation. Even then, we’ll talk through all costs in detail
before you make your decision.

10

Your next steps

Arrange your free phone
consultation with Skipton.

1 Speak to the person referring you today to book a telephone
appointment.

2 Skipton will then call for an initial chat to help you decide
if our advice could be an option for you.

3 If you’re happy to go ahead, Skipton will book you in for
a review either at your local branch or through a video link.

We offer financial advice to anyone with £20,000 or more to invest, or at
least £500 per month or £400 per month for pension related investments.
Or have an existing pension(s) with a minimum value of £50,000.

“We got to know each other 4.8 out of 5
quickly and had some great
conversations – not just Based on 3392 customer
about my finances. It wasn’t reviews as at 08/07/22
a formal interview – it was
relaxed, very personal and 44..65
all about what I wanted.” Rate1R5dathte‘EFdex“bEcruxeacrleyllel2en0n2tt”2’ 08/07/22
Bernard, Birmingham We’re proud to be rated
excellent on Trustpilot
Testimonial model used for illustrative purposes. by our customers. 

Some inheritance tax planning solutions put your capital at risk, as you may
get back less than you invested. Inheritance tax thresholds depend on your
individual circumstances and prevailing legislation, both of which may change in
the future. The Financial Conduct Authority doesn’t regulate Trust planning, Will
writing and most forms of inheritance tax planning. Information provided in this
guide is not intended to be legal or tax advice and is provided for information
purposes only. Allowance and rates are correct as at February 2022.

11

If you’d like this booklet in large print, braille or audio, please ask in branch
or call 0345 850 1700.

Skipton Building Society is a member of the Building Societies Association. Authorised by the Prudential
Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority,
under registration number 153706, for accepting deposits, advising on and arranging mortgages and providing
Restricted financial advice. Principal Office, The Bailey, Skipton, North Yorkshire BD23 1DN. 11-0998\0922