Inheritance Tax

An easy-to-understand explanation of how to avoid paying the inheritance tax in the UK as much as possible

  • In the near future, it will inherit the parents’ heritage I’m glad to get in my property, but I’m worried I don’t know what the burden of inheritance tax will be.
  • It seems that inheritance tax will be considerably cheaper if you take inheritance tax measures, but what should I start from? (Apartment management, life insurance, purchase of tombs?)

This time, I will answer these questions.

When inheritance exceeds a certain amount, you must bear the tax called inheritance tax.

Specifically, please understand that the burden of the inheritance tax will be incurred somehow if the amount of the heritage exceeds 36 million yen.

On the other hand, the UK inheritance tax is also a tax that you can avoid. Inheritance Tax is clearly a huge area of money saving; after all, you do not want to be super-savvy all your life just go to the UK Taxman.

This time, for those who are considering tax savings measures of inheritance tax, I will explain the following contents.

  • The basic calculation method of inheritance tax
  • By when will he have to pay inheritance tax? Rules of
  • Seven tax savings methods to reduce the burden of inheritance tax

The sooner you start tax savings, the more options you have, so be sure to refer to them.

I hope this article will be helpful for those who may be involved in the near future.

Ways to avoid inheritance tax in the UK

The inheritance tax is a tax that the heir must bear when the amount of property left by the deceased person exceeds a certain amount.

The person who will be the heir of the deceased (usually a relative) must be paid by the deadline after the inheritance occurs.

Below, let’s understand the basic rules for inheritance tax.

Calculation method

The following is a brief summary of the inheritance tax calculation method (the actual calculation is a bit more complicated, but here you should understand it roughly).

  • 1 Calculate the “net heritage amount”: deduct the minus heritage from the plus heritage
  • 2 Calculate the “total taxable heritage amount”: Subtract the “base deduction” of the inheritance tax from the “net heritage amount”
  • 3 Calculate “total amount of inheritance tax”: Assuming that “total amount of taxable heritage” is divided by legal succession, apply the calculation to the tax amount table of inheritance tax
  • 4 Calculate the “inheritance tax amount paid by each heir:” Calculate the amount of inheritance tax paid by each heir, based on the percentage of inheritance that is actually selected.

“Basic deduction” of 2 inheritance tax is calculated by the following formula.

Basic deduction of inheritance tax = 3 million yen + 6 million yen × number of legally inherited persons

For example, if there are three eldest sons, second sons and three sons as heirs, the basic tax deduction for inheritance tax will be ¥ 30 million + ¥ 6 million × 3 people = 4 ¥ 8 million.

In this case, the inheritance tax will not be incurred if the net heritage amount does not exceed 48,000 yen.

When do you pay

The inheritance tax will be calculated and paid to the tax office within 10 months, calculated from the day after inheritance (ie the day the relative died).

However, there is no need to file a declaration or payment if the net heritage amount seen above does not meet the amount of inheritance tax basic deduction.

The tax office that makes the declaration and payment is the tax office that was responsible for the address of the deceased person (called an heir).

There is the tax-free property

Although inheritance tax is levied on property left by the deceased, certain types of property are not subject to inheritance tax.

Certain types of property that are not subject to inheritance tax are:

  • Graveyard or altar
  • Of the life insurance and death and retirement benefits up to the amount of “5 million yen × legal succession number”
  • Property that donated to the country or local public organizations
  • Compensation for damages caused by traffic accidents

These cannot be included in the “net heritage amount” seen in the above (1) calculation method for the calculation of inheritance tax (which inevitably reduces the burden of inheritance tax).

Spouses have special tax relief measures

In most cases, the deceased’s spouse is not subject to inheritance tax.

This is because there is a tax relief measure called “speech deduction for inheritance tax”.

Specifically, if “the amount of net heritage that the spouse actually inherited” is up to the next amount, you can get the inheritance tax paid by the spouse as 0 yen.

  • In the case of division of heritage in 1 legal regular succession, inheritance tax does not always apply
  • If you split the heritage at a rate different from the legally required portion, up to 160 million yen

For example, suppose that there are a spouse and three children (four people in total) as a bereaved, and there are 400 million yen in heritage.

If we split the property according to legal succession, the share of the spouse is half, so it will be 400 million yen × 1/2 yen = 200 million yen.

In this case, the upper one does not apply the inheritance tax to the spouse.

On the other hand, it is assumed that the inheritance division was conducted as follows: “Spouse 250 million yen, 3 children 5 million yen each” in the discussions among the heirs.

In this case, 2 will be subject to the inheritance tax also to the spouse.

In addition, it is necessary to report inheritance tax even if there is no need for tax payment in order to have the spousal deduction of inheritance tax be applied.

In addition, please be careful that inheritance division discussion needs to be completed by the time of filing inheritance tax.

With seven measures that we want to do before life to hold down inheritance tax

The following seven are representative of the tax-saving measures to reduce the burden of inheritance tax.

  • (1) Utilize a lifetime gift
  • (2) Real estate investment such as apartment management
  • (3) Use life insurance
  • (4) Adoption
  • (5) Birth purchase such as graveyards
  • (6) Division of land
  • (7) We use exception such as small-scale residential land

Let’s look in detail about the contents of each method and the points to use.

Utilize a lifetime gift

A lifetime gift, simply put, means that the person who owns the property divides and gives the property to the family, etc. for future inheritance.

Since inheritance tax is levied on the property left at the time of inheritance, if the amount of property left in advance is reduced, the burden of inheritance tax can be reduced accordingly.

However, please be aware that it is necessary to bear the gift tax at the time of giving a life gift if the amount given for a lifetime gift exceeds a certain amount.

There are the following as a method of lifetime gift when it is done as a measure of inheritance tax.

  • the calendar year gift
  • Giving of educational funds
  • Grant of a house acquisition fund
  • Gift of marriage and child care fund
  • husband and wife giving housing funds
  • Each method is explained in order.

the calendar year gift

A calendar year gift is a method of giving a lifetime gift every year as its name suggests, and it is an effective tax-saving policy when there is a considerable amount of time until the time of inheritance occurs.

As we saw above, if the amount of property to be gifted before birth exceeds the “certain amount”, you must bear the gift tax.

The “fixed amount” mentioned here means up to 1.1 million yen in one year.

For example, if cash of ¥ 1.100 million per year is given to three children over 10 years in the form of a calendar year gift, 1 million You can do it (the inheritance tax does not apply).

However, for the living gifts that were made three years before the start of inheritance, it is necessary to recalculate the inheritance amount and calculate the inheritance tax.

If inheritance occurs 10 years after starting gift donation in the above case, of the total 10 years of gift donation, the first to seventh years are exempt, but the eighth to For the 10th year, inheritance tax will be levied.

However, if you choose a special method of giving a live gift as shown in the following 2 to 5, even if these gifts are given within 3 years before the occurrence of inheritance, it is not necessary to exceptionally be included in the deemed heritage.

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