Laws, rules, and regulations are established to ensure that equality and justice prevails in the country. On the other hand, tax laws are created to generate revenue for the government to support its operations. The government of a country has many sources to earn revenue for its operations. However, taxes are among the most common sources of revenue for a country.
The government of every country has many duties, which it needs to perform, and obviously needs revenue to perform them. Therefore, different taxes and duties on imports and exports are levied to gather enough revenue to perform these duties.
In the United Kingdom, there is a fixed percentage of inheritance tax, which is to be paid if an individual inherits some property. There are few laws regarding the calculation of inheritance tax. According to the system of law enforced in the United Kingdom, when a person inherits some property, a 40% tax is to be paid on the amount of property inherited, above the Nil Rate band. For the year 2009/2010, the Nil Rate band is £325,000.
According to the tax laws of the United Kingdom, if, after the death of the first spouse, a part or the entire amount to be included in the Nil Rate band is not used at all, it is transferred, and is available for use at the time of death of the second spouse. For example, if ‘A’ died leaving behind 100,000 worth of chargeable estate and the Nil Rate band for that year was 200,000 and ‘B’, the remaining spouse, didn’t use 50% of the Nil Rate band, it is transferable for the calculation of tax for the inheritance when the other spouse dies.
In this case, let us suppose when B dies, she leaves behind an estate of 400,000 then the Nil Rate band would be the exempt amount plus 50% of the Nil Rate band i.e. 450,000 if the Nil Rate band for the year were 300,000. The Nil Rate band is the amount of exemption granted by the government for the calculation of tax on the inherited of property.
If A leaves behind 400,000 worth of estate to his heirs and the Nil Rate band for the year is 325,000 then 75,000 would be the amount on which the tax would be applicable. On the other hand, if A had left behind a property worth less than 325,000, let’s say an estate worth 300,000 then no tax would be applicable on the amount inherited by the heirs.
Sometimes, the tax calculation for inheritance related matters become very complex and difficult to understand. In such cases, a proper consultancy lawyer should be consulted as they are proficient in dealing with such issues and are able to deal with the most complex calculations.
Although some people would argue that paying an extra fee for the consultancy services would be an added expense, which they can save by making tax calculations themselves, but the fact is that in some cases, paying this added fee might save one from a heavy future loss.