A Government scheme could help parents save up to £2,000 on their childcare costs through tax reliefs aimed at working parents. Continue reading
Author Archive: Muhammad Zia
Best practices for business and personal finances
Mixing personal and business finances is a common mistake that many entrepreneurs, freelancers, and small business owners make.
Cash flow vs profits: a guide for small business owners
As a small business owner, you’ve likely heard the terms “cash flow” and “profits” used interchangeably. However, mixing these financial metrics up can cause severe consequences for your business.Continue reading
Three things to consider when forecasting your finances as a small business owner
Forecasting is the act of looking at past and present financial data to predict future costs, expenses, and profits. Small businesses do this to tailor their business model more effectively.Continue reading
Navigating estate planning and Inheritance Tax: what you need to know
HM Revenue & Customs (HMRC) recently announced that Inheritance Tax (IHT) receipts were up by £200 million between April to July 2023, making this a record high.
Self-Assessment benefits for small businesses
As a small business owner, you are probably familiar with the term ‘Self-Assessment’. While many entrepreneurs link Self-Assessment primarily with the yearly tax ritual, it offers a lot more.Continue reading
The role of cloud accounting in modern businesses
In today’s digital age, the way businesses manage their finances has seen a seismic shift, largely due to the introduction and growing popularity of cloud accounting.
Understanding Director’s Loan Account (DLA) and the risks involved
Directors might opt to either lend money to or borrow from their own company. This type of transaction is called a director’s loans, and they are recorded in the Director’s Loan Account.
What tax implications can come with depreciation?
For business owners, understanding depreciation is not just about accounting practices but also about handling their taxes efficiently. Continue reading
How to identify and value the assets of an estate and its Inheritance Tax implications
When a loved one passes away, dealing with administrative tasks can be a daunting prospect that is made harder considering the emotional situation that caused it.
One of the most important tasks is valuing the deceased’s estate, which is crucial for tax purposes, particularly Inheritance Tax (IHT).
Valuing assets must be done before applying for probate, so it is a crucial aspect of the process.
What is an estate?
An estate comprises all the assets a person owns at the time of their death. This includes property, money, investments, businesses, and personal belongings.
Debts, such as loans, mortgages, and bills, are also part of the estate and need to be settled from the estate’s assets.
Identify the assets
The first step in valuing an estate is to list all the assets and debts. Assets can include:
- Property
- Money
- Investments such as stocks or shares and trust funds
- Life insurance policies and pension benefits
- Personal belongings
- Business assets
For each asset, you need to find out its value at the date of death. This might involve getting professional valuations for property or valuable items.
For money in bank accounts or investments, you should contact the relevant institutions to get a valuation.
Debts should also be valued at the date of death. You should contact lenders or service providers to find out how much is owed.
Once you’ve valued all the assets and debts, you can calculate the net value of the estate by subtracting the total debts from the total assets.
Inheritance Tax (IHT) implications
IHT is a tax on the estate of an individual who has died. The standard IHT rate is 40 per cent on the part of the estate above the nil-rate band, which is currently £325,000.
However, there are several reliefs and exemptions that can reduce the IHT liability.
For example, if the deceased left everything above the £325,000 threshold to their spouse, civil partner, a charity, or a community amateur sports club, there’s usually no IHT to pay.
A ‘residence nil-rate band’ might apply if the deceased’s home is left to their direct descendants, such as children or grandchildren.
Dealing with the death of a loved one is never easy, but understanding the process can help make the administrative tasks a little less daunting.
At Rotherham Taylor, our expert probate team can help guide you through valuing the assets of an estate and provide advice on IHT. We are one of a small number of accountancy practices in the UK to be licensed to provide probate services by the Institute of Chartered Accountants in England and Wales (ICAEW).
