Making a will is the best way to ensure that your estate will be passed on to your family and loved ones.
It's also a good idea to get an understanding of inheritance tax (IHT) and how it will affect the distribution of your estate. IHT is usually paid on an estate when somebody dies – that is, the total money and possessions they leave behind. In the 2013-14 tax year, estates worth more than £325,000 are liable to be taxed at 40%*. You’ll only be taxed on the amount over this threshold, also known as the 'nil rate band'. So if you leave £500,000, for example, your estate will potentially have to pay £70,000 (40% of £175,000) in IHT. If you leave your estate to your spouse or registered civil partner who is domiciled in the UK, there's no IHT to pay when you die – even if your estate is worth more than £325,000. What's more, if you die first, any unused part of your nil rate band can be transferred to the survivor. This means that the second person could potentially leave up to £650,000 without needing to pay any IHT. Anything above this amount will incur IHT at 40%*. Please note; if you've never married your partner, even if you've been with them for many years, the spouse exemption and the transferable nil rate band will not apply.
* If you leave some of your estate to charity the rate may be reduced to 36%.
As your liabilities decrease and your assets increase, you can use life insurance to meet your IHT bill. However, you can also take some of the following steps to minimise the burden:
- You can give up to £3,000 each tax year without incurring IHT. If you didn't do this in the previous year, it can be carried over to add to the current year's exemption.
- Most gifts of any amount made more than seven years before your death are also exempt from IHT.
- You can give as much money as you like (in addition to the £3,000 a year mentioned above) without affecting your IHT liability, as long as it’s a regular payment out of your surplus income. So, for example, grandparents might pay school fees for their grandchildren.
- There are also exemptions for gifts made 'in consideration of marriage', which are valuable if you want to help out your children or grandchildren who are getting married.
- You can make small gifts up to the value of £250 to as many individuals as you like in any one tax year.
The amount of tax you pay will depend on your individual circumstances and may be subject to change in the future.
Check if you qualify for advice
If you have £50,000 or more in savings and investments, you may be eligible for HSBC Premier Financial Advice. See the full eligibility criteria.
If you don't qualify for HSBC Premier Financial Advice or if you'd rather not pay for advice, see other ways we can help.
*Our opening hours are Monday to Friday 8am to 9pm and 9:30am to 7pm on Saturday. Calls may be monitored or recorded.
Eligibility requirements
HSBC Premier Financial Advice is available to UK residents who have £50,000 or more in Savings and Investments and who are at least 18 years old at the time of the initial consultation.
You'll also need to have an HSBC Current Account or Savings Account for us to be able to deduct your fee. We can accept payment from a first direct Current or Savings Account too.
To find out more:
- See our HSBC Premier Financial Advice pages or;
- Call us on 0800 328 1298 to book an initial no-obligation consultation with an adviser. Lines are open Monday to Friday 8am to 9pm and 9:30am to 7pm on Saturday. (Textphone: 18001 0800 028 0126).
If you don't qualify for HSBC Premier Financial Advice, or if you'd prefer not to pay for advice, see other ways we can help.
If you are not a UK resident, see our HSBC Expat service.
