Inheritance Tax Checklist

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Making a financial inventory of your life sounds easy, but listing what you own of value and what you owe can take some time to work out.

The list should be detailed and it might help to label small belongings of value to give your executor or loved ones some clue of what you have listed.

Values need to be precise because HM Revenue & Customs (HMRC) may argue that the amount of inheritance tax due is too little if a tax inspector believes some items are incorrectly valued.

If the value of your estate comes in at just under the nil band threshold – the point where inheritance tax is due – you may find the tax man will want to closely examine how you arrived at the total.

To help out, here’s a list of common items to include on your statement of net worth.

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Working out what you are worth

The first step is to value of everything you own – including:

  • Life insurance payments that are not held in trust
  • The value of your home
  • The value of any investment property
  • How much money you have in the bank
  • The value of any investments
  • The value of your car and any other vehicles
  • The value of any boats, caravans, jet skis or other expensive leisure items
  • How much any collections, art, antiques or jewellery are worth
  • The value of any inheritance you may receive
  • Any money someone may owe you

Add up all these figures to assess your gross net worth – that’s what you are worth before subtracting any debts.

Working out what you owe

Next, add up the total of all your debts – including:

  • Mortgages on your home or any other property
  • Credit card balances
  • The balance of any outstanding loans or HP – like a car loan or personal loan
  • Bank overdrafts

Now, add any one-off costs on your death, like legal fees for handling your estate and funeral expenses.

Take the debt total away from the asset total to leave your net worth. This is the figure inheritance tax is charged on.

If the figure is less than £325,000, then you do not have to worry about inheritance tax unless something happens that is likely to bump the total over the threshold.

If the total exceeds £325,000, then inheritance tax is paid on the balance at a rate of 40%.

This is the point where you should consider talking to an independent financial advisor about estate planning to minimise the tax your family and loved ones pay.

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