Inheritance tax warning as Britons face billions of dollars to live in their own homes | Personal Finances | Finance
The inheritance tax is currently set at 40 percent, but with many people who hate this tax, they will want to legally avoid it. One of the main ways to avoid the direct debit is to leave everything to one partner, however, the partner must be a spouse or civil partner. Because of this, those who are unmarried and cohabiting could face a potentially colossal tax bill, a leading expert warned.
“Let’s say you own a £ 1million property together and the surviving partner inherits. You get £ 325,000 tax-free, but the remaining £ 175,000 is taxable.
“So you have to come up with 40 percent of £ 175,000 – that’s £ 40,000 or £ 50,000 just to continue living in your own house as usual.”
The fact that a couple has lived together for years, if not decades, unfortunately does not matter under the current rules.
For this reason, people should be especially careful and take action if they wish, to avoid a bad shock.
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Ms Roche continued: ‘Unless you are married or in a civil partnership, you will potentially have to find thousands of pounds to pay that tax bill.
“This shows that no matter if it is your own possession or property, the tax will always apply.”
Ms. Roche explained that this is a consideration that many people overlook in their day-to-day lives.
But it could cause chaos later, and potentially a lot of financial grief.
Attitudes towards marriage and civil partnership are clearly changing, with ONS research showing a change.
Statistics have shown that the proportion of families comprising a cohabiting couple increased from 15.3% to 18.4% in the 10 years until 2019.
However, as times have moved in this direction, from a monetary standpoint, the system seems to stay the same.
Ms. Roche underlined: “The law has been changed with regard to marriage when one thinks of civil partnership.
“It is no longer only same-sex couples who can be civil partners, but also heterosexual couples.
“A lot of people don’t want to ‘get married’ as such, so this might be a solution if they hope to legally avoid tax.
“But whatever, it’s still a bit tricky for a lot of people.
“Some couples absolutely do not want to get married or have automatic inheritance tax, which is why they remain as a couple.
“But if you make this choice, you should be aware of the tax implications you might have on yourself.”
For some, however, the issue of marriage and inheritance is not a conscious decision, and therefore Ms Roche said some couples may wish to consider the matter.
She stressed the importance of exploring this issue further and possibly consulting experts to provide assistance.
Ms. Roche concluded: “Again, this is a knowledge of inheritance tax rules.
“It really is a minefield, and it’s definitely worth getting some advice because you can save a lot of money, time, and arguments by sorting it out in the first place.
“It might sound expensive, but it could be worth it – there’s a reason for that, because they’re going to cover everything. “