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Lecture 8

Taxation

By

Dr Jacinta Nwachukwu

Principal Lecturer in Finance

School of Economics, Finance and Accounting

[email protected]

Something to think about

Distinguish between the following terms:

Tax evasion

Tax avoidance

Tax mitigation

We can’t get away from taxation. Almost every aspect of our financial affairs is affected one way or another by taxes at national and state (county) levels. Although these terms are used interchangeably, they mean different things.

1. Tax evasion is when an individual deliberately omit something from his/her tax returns, give a false description of their financial circumstances. This individual has acted dishonestly and criminally and so could be find or imprisoned.

2. Tax avoidance is when an individual uses creative accounting and devices designed deliberately to exploit tax loopholes. It is simply taxpayers taking advantage of the law to minimize their tax bill. This is actually not a illegal offence, although there are signs that society will no longer tolerate such selfish and greedy activities.

3. Tax mitigation is when individuals put their investments in tax relief and efficient investments such as ISAs and pension schemes. This is positively encouraged by government, the inland revenue and financial planners. So, for most people, tax evasion and avoidance constitute tax abuse and should not be tolerated. On the other hand, tax mitigation schemes however should be recommended by financial planner. We will look at some of these tax efficient investment opportunities available to UK residents.

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Lecture Outline

(1) Income Tax and Personal Allowances

(2) National Insurance Contributions

(3) Capital Gains Tax

(4) Inheritance Tax

(5) Stamp Duty Land Tax

You pay taxes when you get paid from work, when you invest, when you inherit from deceased relatives and when you purchase certain items (VAT)

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Introduction to uk tax system

https://www.youtube.com/watch?v=FVbFp6jopfQ

Income Tax: What we know so far

Personal Allowance (£11,000)

National Insurance contributions

Profit income for the self employed and pension income for the retired.

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Income TAX

Dividend from shares

Interest from savings and bonds

Income from wages, profits, pension

UK Progressive Income Tax System

£0

Tax Bands (£ p.a)

Gross Income (£ p.a)

£5000

£11,000

£16,000

£27,000

£43,000

£118,000

£150,000

Starter band for savings only

Basic rate band (20%)

Higher rate band (40%)

Additional rate band(45%)

Tax free band (0%)

Lowest rate band (10%)

Illustrate:

For earnings, we ignore the starter band for savings. The first band is equal to (£27,000+5,000 = £32,000)

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UK Progressive Income Tax System

£0

Tax Bands (£ p.a)

Gross Income (£ p.a)

£5000

£11,000

£16,000

£27,000

£43,000

£118,000

£150,000

40% on (£12,000) = £4,800

Example, income of £55,000

0% on (£11,000)

20% on (£32,000) =£6,400

Taxable income or taxable earnings

Total income tax = 6400+4800 =£11,200

Tax mitigation will be to reduce the amount in the 40% tax bracket using pension contributions

Illustrate:

For earnings, we ignore the starter band for savings. The first band is equal to (£27,000+5,000 = £32,000)

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Income Tax Rates / Personal Allowances

15/03/2017

Personal Allowance 2016-17 - £11,000

Income Tax Rate of Tax (above the personal allowance)
Basic rate Tax 20% £0 - £32,000 That is the next £32,000 over and above the personal allowance This is equivalent to a gross income threshold of £43,000
Higher Rate Tax 40% Next £32,0001 to £150,000 This is equivalent to an additional £118,000
Additional rate 45% Over £150,000

Your Personal Allowance goes down by £1 for every £2 that your adjusted net income is above £100,000. This means your allowance is zero if your income is £122,000 or above.

For ease of calculation, we assume that income above £100,000 attracts a zero personal allowance

Current rates and allowances

How much Income Tax you pay in each tax year depends on:

how much of your income is above your Personal Allowance

how much of this falls within each tax band

The current tax year runs from 6 April 2015 to 5 April 2016.

Your tax-free Personal Allowance

The standard Personal Allowance is £10,600, which is the amount of income you don’t have to pay tax on.

Your Personal Allowance may be bigger if you were born before 6 April 1938 or if you get Blind Person’s Allowance. It’s smaller if your income is over £100,000.

Income Tax rates

Tax rate Taxable income above your Personal Allowance Basic rate 20% £0 to £31,785 People with the standard Personal Allowance start paying this rate on income over £10,600 Higher rate 40% £31,786 to £150,000 People with the standard Personal Allowance start paying this rate on income over £42,385 Additional rate 45% Over £150,000

Example You have £35,000 of taxable income and you get the standard Personal Allowance of £10,600. You pay basic rate tax at 20% on £24,400 (£35,000 minus £10,600).

*The 10% starting rate applies to savings income only.

- If your non-savings income is above this limit then the 10% starting rate for savings will not apply.

The rates available for dividends are:-

the 10% ordinary rate (income at £31,865),

the 32.5% dividend upper rate (£150,000), and

the dividend additional rate of 37.5% (£150,000+).

Additional rate of income tax reduced from 50% to 45% from 6 April 2013

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Types of income on which tax is payable

This is a tax payable on income. You don’t have to pay tax on all types of income.

Income Tax is a tax you pay on your income. In the UK, this tax is payable on a progressive income tax basis.

A progressive tax takes a larger percentage of income from high-income groups than from low-income groups and is based on the concept of ability to pay.

A progressive tax system might, for example, tax low-income taxpayers at 20 percent, high income taxpayers at 40 percent and additional high-income taxpayers at 45 percent.

The U.K. national income tax is based on such a progressive tax system.

Such a progressive tax takes a larger share of income from high-income groups than from low-income groups, which "gives" lower-income workers more money by letting them keep more of what they earn.

DEFINITION of 'Progressive Tax'

A tax that takes a larger percentage from the income of high-income earners than it does from low-income individuals. The United States income tax is considered progressive: in 2010, individuals who earned up to $8,375 fell into the 10% tax bracket, while individuals earning $373,650 or more fell into the 35% tax bracket. Basically, taxpayers are broken down into categories based on taxable income; the more one earns, the more taxes they will have to pay once they cross the benchmark cut-off points between the different tax bracket levels.

BREAKING DOWN 'Progressive Tax'

The U.S. progressive income tax is effectively a means of income redistribution. Individuals who earn more pay higher taxes; those taxes are then used to fund social welfare programs that are used primarily by individuals who earn less. Critics of the progressive tax consider it to be discriminatory and believe that a flat tax system, which imposes the same tax on everyone regardless of income, is a fairer method of taxation.

Easy to write off expenses on self-employed assessment.

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Types of Income on which tax is payable

Money you earn from employment

Profits you make if you’re self-employed - including from services you sell through websites or apps

Some state benefits

Most pensions, including state pensions, company and personal pensions and retirement annuities

Interest on savings and pensioner bonds

Rental income (unless you’re a live-in landlord and get £4,250 or less)

Benefits you get from your job

Income from a trust

Dividends from company shares

You pay tax on things like:

Money you earn from employment

Profits you make if you’re self-employed - including from services you sell through websites or apps

Some state benefits

Most pensions, including state pensions, company and personal pensions and retirement annuities

Interest on savings and pensioner bonds

Rental income (unless you’re a live-in landlord and get £4,250 or less)

Benefits you get from your job

Income from a trust

Dividends from company shares

You don’t pay tax on things like:

income from tax-exempt accounts, like Individual Savings Accounts (ISAs) and National Savings Certificates

some state benefits

premium bond or National Lottery wins

the first £4,250 of rent you get from a lodger in your home

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Income tax PAYE calculations

https://www.youtube.com/watch?v=AhgR3X--bbY

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Practice question 1

How much income tax is payable by Mr Smith on the following annual salary levels

£6,000

£28,500

£48,500

£57,588

£74,000

£170,000

£250,000

£500,000

Assign students to four groups (preferably each row plus the row at the back) and ask each group to work on each gross income

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National Insurance contribution

National Insurance contributions build entitlement to certain state benefits, including the State Pension.

National Insurance is paid if an individual is:

16 or over

Earning above £155 a week

Self-employed and making a profit of £5,965 or more a year

However, if an individual earns between £112 and £155 a week, he/she will not be required to pay any National Insurance, but will be entitled to some basic National Insurance benefits

For example, Mr Smith earns £96 per week in one job and £115 per week in a second job.

Neither Mr Smith nor his employers pay National Insurance because the salary in both cases are under the threshold of £155.

However, because his earnings are over £112 per week in the second job, Mr Smith will gain basic state benefit rights from this second job.

See the weblink below for information on national insurance credit eligibility

https://www.gov.uk/national-insurance-credits/eligibility

However, if an employee earns between £112 and £155 a week, he/she will not be required to pay any National Insurance, but will be entitled to some basic National Insurance benefits

Any contributions are treated as having been paid to protect your National Insurance record.

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£ per week 2010-11 2011-12 2012-13 2013-14 2014-15 2016-2017
Lower earnings limit, primary Class 1 £97 £102 £107 £109 £111 £112 [155]
Upper earnings limit, primary Class 1 £844 £817 £817 £797 £805 £827
Employees' primary Class 1 rate between primary threshold and upper earnings limit 11% 12% 12% 12% 12% 12%
Employees' primary Class 1 rate above upper earnings limit 1% 2% 2% 2% 2% 2%
Class 1A rate on employer provided benefits (1) 12.80% 13.80% 13.80% 13.8% 13.80% 13.80%

Class 1 National Insurance thresholds

If you’re employed

You pay Class 1 National Insurance contributions. The rates for most people for the 2015 to 2016 tax year are:

Your pay Class 1 National Insurance rate£155 to £815 a week (£672 to £3,532 a month)12%Over £815 a week (£3,532 a month)2%

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UK National Insurance Tax System (Class A)

£0

Tax Bands (£ p.w)

Gross Income (£ pw)

£155

£672

£827

Basic rate band (12%)

Additional rate band(2%)

NI tax free tax band (0%)

Illustrate:

For earnings, we ignore the starter band for savings. The first band is equal to (£27,000+5,000 = £32,000)

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Class 1 National Insurance: Key points

If you're employed you pay Class 1 National Insurance contributions. The rates are:- (Tax year 2016/2017)

(1). If you earn between £112 and £155 a week, you are not required to make a NIC contribution

(2) If you earn between £155 and £827 a week, you pay 12 % of the amount you earn between £155 and £827

For example, if you earn £154 per week

Your NIC = £154 x 0 = £0 per week (or 0 pm)

For example, if you earn £673 per week

£155*0 = 0

(673-155)*0.12 = £62.16

Your NIC = 0 + 62.16 = £62.16 per week (or £745.92 pm)

(3) If you earn £1815 a week, you also pay a further 2% on all your gross earning. That is:

£155*0 = 0

(827-155)*0.12 = £80.64

( 1815-827) *0.02 = 19.76

Your NIC = (0+80.64+19.76) = 100.40per week (or £401.6 pm)

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National insurance rates for the Self Employed

NICs are very much in the news at the moment following the changes in last week’s budget on the rates paid by the self employed (SO WHAT HAVE YPU HEARD?)

https://www.gov.uk/government/publications/rates-and-allowances-national-insurance-contributions/rates-and-allowances-national-insurance-contributions

National Insurance (self-employed)

Self Employed 2010-11 2011-12 2012-13 2013/14 2014/15 2015/2016
Class 4 lower profits limit (p.a) £5,715 £7,225 £7,605 £7,755 £7,956 £8,060
Class 4 upper profits limit (pa) £43,875 £42,475 £42,475 £41,450 £41,865 £43,000
Class 4 rate between lower profits limit and upper profits limit 8% 9% 9% 9% 9% 9%
Class 4 rate above upper profits limit 1% 2% 2% 2% 2% 2%

Class 2 National Insurance - how much you pay

You pay Class 2 National Insurance contributions at a flat rate of £2.80 a week. However, if your earnings are below £5,965 per year (2015-16) you might not need to pay

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Practice Question 2

Mr Smith is employed as a cleaner at the local supermarket. He earns £6,000 per annum. Calculate his NIC contribution?

Mr Smith is employed as a receptionist at a local hairdressers. She earns 28,500 per annum. Calculate how much NIC he would be required to pay?

Mr Smith is employed as project manager. He earns £48,500 per annum. Calculate his NIC contribution

Mr Smith is employed as a Chief Financial officer. He earns £74,000 per year. Calculate his NIC contribution

Mr Smith is a company chief executive. He earns £250,000 per annum. Calculate his NIC contribution

Again ask each row to calculate the NI for the income assigned to them earlier

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Practice question 3

Using the information in practice questions I and 2, calculate:

The total amount of tax payable by Mr Smith on his income

The net pay (or disposable income) for Mr Smith on his income

Again ask student to report on the income assigned to them

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Capital Gains Tax

Capital Gains tax is paid on the ‘profit’ on selling certain assets such as shares, personal possessions, second homes or buy to let investment properties.

Annual Allowance is currently:

Basic Rate Tax payers pay 18%

Higher rate taxpayers and additional rate taxpayers pay 28%

Some National Savings and Investment products pay returns that are free from income and capital gains tax.

These include Premium Bonds, Fixed Interest and Index-Linked Savings Certificates, Children’s Bond and Cash ISAs.

Tax year 2010-2011 2011-2012 2012- 2013 2013- 2014 2014- 2015 2015- 2017
Customer group Individuals £10,100 £10,600 £10,600 £10,900 £11,000 £11,100

The annual exemption of £11,000 for the 2015-2016 tax year is the amount of capital gains an individual can make before paying capital gains tax at the basic rate or higher rates, depending on the income tax bracket they belong.

Note that CGT liability is only incurred when an investor makes a chargeable gain. That is, when an asset is sold and its value has risen since the time it was purchased, adjusted for inflation.

It is also possible to crystalise a capital loss if the investor sells the asset that has lost value since purchase. The loss is offset against gains in the current tax year or it can be rolled over for use in future tax years

Gifts between spouses are exempt from CGT, So a tax-efficient couple should consider giving each other gifts to make use of this exemption

Investors who receive “windfall” when a building society converts from mutual to PLC status are exempted from CGT

Other tax-exempt savings/investment products include Individual Savings Accounts (ISAs)

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Practice question 4

Calculate the capital gains tax for Mr Smith assuming the following annual incomes:

£6,000

£28,500

£48,500

£74,000

£250,000

Mr Smith recently sold his investment in TESCO shares for a total of £20,000. He originally paid a total sum of £5500 for their purchase 10 years ago.

Assume a capital gains tax rate of 18 for basic tax payers and 28 percent otherwise

4. Inheritance tax

When an individual dies, their estate, including property, money and possessions, is liable to an inheritance tax rate of 40 percent if the total sum exceeds the annual threshold of £325,000 for the tax year 2015-2017

This tax is deducted from the deceased’s estate (i.e., total assets minus total liabilities) before it can be passed on to the beneficiaries

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Inheritance Taxation

This is a tax paid at 40% above the following value of a person’s estate:

From To Threshold/nil rate band
06-Apr-09 05-Apr-17 £325,000
06-Apr-08 05-Apr-09 £312,000
06-Apr-07 05-Apr-08 £300,000
06-Apr-06 05-Apr-07 £285,000
06-Apr-05 05-Apr-06 £275,000
06-Apr-04 05-Apr-05 £263,000
06-Apr-03 05-Apr-04 £255,000
06-Apr-02 05-Apr-03 £250,000

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Transferring Inheritance Tax Thresholds

If someone’s estate is less than the Inheritance Tax threshold of £325,000, the remaining threshold can be transferred to their husband, wife or civil partner’s estate when they die - even if they remarried.

This means the surviving partner’s estate can be worth up to £650,000 before any Inheritance Tax is due.

The transfer is made when the surviving husband, wife or civil partner dies and is done by the executor of their will or the administrator of their estate when they work out how much it’s worth.

This means that if Mr Ryan and Mr Robinson died and passed nothing to their children and all their spouses, then the £325,000 threshold which they have also been on this their spouses. So when the spouse dies, the total threshold of £325,000 (from the deceased husband ) plus her own right of £320,000 will be passed on her beneficiaries when she dies.

Keeping records

The executor or administrator of the estate should give the surviving husband, wife or civil partner documents that show any unused Inheritance Tax threshold.

These will be needed to transfer the threshold to the surviving partner’s estate when they die.

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IHT Exemptions / Reliefs

Spouse or civil partner exemption. Your estate usually doesn't owe Inheritance Tax on anything you leave to a spouse or civil partner who has their permanent home in the UK - nor on gifts you make to them in your lifetime - even if the amount is over the threshold.

Charity exemption. Any gifts you make to a 'qualifying' charity - during your lifetime or in your will - will be exempt from Inheritance Tax.

Potentially exempt transfers. If you survive for seven years after making a gift to someone, the gift is generally exempt from Inheritance Tax, no matter what the value.

Annual exemption. You can give up to £3,000 away each year, either as a single gift or as several gifts adding up to that amount - you can also use your unused allowance from the previous year but you use the current year's allowance first.

Small gift exemption. You can make small gifts of up to £250 to as many individuals as you like tax-free.

Wedding and civil partnership gifts. Gifts to someone getting married or registering a civil partnership are exempt up to a certain amount.

Business, Woodland, Heritage and Farm Relief. If the deceased owned a business, farm, woodland or National Heritage property, some relief from Inheritance Tax may be available.

Charity exemption. Any gifts you make to a 'qualifying' charity - during your lifetime or in your will - will be exempt from Inheritance Tax. A donation to charity in your will may also reduce the rate that tax is paid at (see more in the link below).

Note that if gifts is a house, then the parents will have to move out or the Inland revenue will continue to treat the house as belonging to the parents’.

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Practice question 5

Assume the following:

(i) Ms Singh died in the summer of 2016 and his estate is worth £1m

(ii) She has total outstanding debt including mortgage on her residential home and credit card loans of £300,000

(iii) She is single with two children

Calculate the amount of inheritance tax payable on her estate

Inheritance tax planning (Part i)

https://www.youtube.com/watch?v=ahzhnPl5D94

Inheritance tax planning (Part iI)

https://www.youtube.com/watch?v=7Kr6QSTpLug

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Stamp Duty Land Tax

You must pay Stamp Duty Land Tax (SDLT) if you buy a property or land over a certain price in England, Wales and Northern Ireland

You pay the tax when you:

(i) Buy a freehold property

(ii) Buy a new or existing leasehold

(iii) Buy a property through a shared ownership scheme run by an approved public body such as local housing authorities, housing associations, housing action trusts and development corporations

(iv) Are transferred land or property in exchange for payment, e.g., you take on a mortgage or buy a share in a house

You can choose to either:

(i) Make a one-off payment based on the market value of the property (‘market value election’)

(ii) Pay SDLT in stages

This calculator can be used for residential property or non-residential property.

http://www.hmrc.gov.uk/tools/sdlt/land-and-property.htm

You can choose to either:

make a one-off payment based on the market value of the property (‘market value election’)

pay SDLT in stages

The calculator works out the Stamp Duty Land Tax (SDLT) you'll have to pay for residential purchases (including lease premium) using new rules effective from 4 December 2014. It also shows how much SDLT is due under the previous rules and for non-residential purchases.

You may be eligible for Stamp Duty Land Tax (SDLT) reliefs in certain situations. These reliefs can reduce the amount of tax you pay.

SDLT no longer applies in Scotland. Instead you pay Land and Buildings Transaction Tax when you buy a property.

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Stamp Duty Land Tax - 2015/17

Purchase price/lease premium or transfer value of freehold residential properties Stamp Duty Land Tax (SDLT) rate
Up to £125,000 0 %
The next £125,000 (the portion from £125,001 to £250,000) 2%
The next £675,000 (the portion from £250,001 to £925,000) 5%
The next £575,000 (the portion from £925,001 to £1.5 million) 10%
The remaining amount (the portion above £1.5 million) 12%

You may be eligible for Stamp Duty Land Tax (SDLT) reliefs in certain situations.

https://www.gov.uk/stamp-duty-land-tax/reliefs-and-exemptions

These reliefs can reduce the amount of tax you pay.

You must complete an SDLT return to claim relief, even if no tax is due.

SDLT no longer applies in Scotland. Instead you pay Land and Buildings Transaction Tax when you buy a property

http://www.gov.scot/Topics/Government/Finance/scottishapproach

Freehold sales and transfers

You can also use this table to work out the SDLT for the purchase price of a lease (the ‘lease premium’).

Property or lease premium or transfer value:

SDLT rate Up to £125,000 , Zero

The next £125,000 (the portion from £125,001 to £250,000), 2%

The next £675,000 (the portion from £250,001 to £925,000), 5%

The next £575,000 (the portion from £925,001 to £1.5 million), 10%

The remaining amount (the portion above £1.5 million) ,12%

Example: If you buy a house for £275,000, the SDLT you owe is calculated as follows:

0% on the first £125,000 = £0

2% on the next £125,000 = £2,500

5% on the final £25,000 = £1,250

Total SDLT = £3,750

Special rates

There are different SDLT rules and rate calculations for:

corporate bodies

people buying 6 or more residential properties in one transaction

shared ownership properties

multiple purchases or transfers between the same buyer and seller (‘linked purchases’)

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UK Progressive SDL Tax System

£0

Tax Bands (£000s p.a)

House purchase price (£p.a)

£125K

£125K

£250K

£675K

£925K

Tax rate 2%

Tax rate 5%

Tax 10%

£575K

£1.5MK

Tax rate 0%

Tax rate 12%

Illustrate:

For earnings, we ignore the starter band for savings. The first band is equal to (£27,000+5,000 = £32,000)

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Practice question 4

Calculate the stamp duty land tax payable on the following properties purchased by Mr Smith in 2016/2017 tax year at the price of:

1. £122,000

2. £225,000

3. £500,000

4. £650,000

5. £950,000

6. £5million

House purchase price in 2015 of £225,000

Stamp Duty to pay in 2015 = up to £125,000 = 0

225,000 – 125,000 = £100,000

£100,000 x 2% = £2,000

House purchase price in 2015 of £625,000

Stamp Duty to pay in 2015 =

£125,000 x 0% = £0

£125,000 x 2% = £2,500

£375,000 x 5% = £18,750

Stamp Duty to Pay = £2,500 + £18,750 = £21,250

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End of lecture

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Personal Allowances Tax Codes Explained

https://www.youtube.com/watch?v=Q879oFAzNCE

This video show how tax codes are determined

The fact that all employees receive a personal allowance means that the best ways to save on income tax is to spread income between the spouses to make sure they utilise their allowed annual personal tax allowance. Another way to minimize a household’s tax bill is to give income-generating assets to the lower earning spouse.

If there is a family business, then a spouse should be paid a normal salary. Obviously it is important that adequate documentation is kept in order to justify the payment to the inland revenue

Also, parent breadwinners who pay tax at high rates could consider passing income producing assets to their children who can make use of their own personal income tax allowances and where necessary their lower and basic tax rates. But note that this gift has to be unconditional or the inland revenue may not be convinced.

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Other of taxation Earning, Interest and Dividend

https://www.youtube.com/watch?v=bbzXJDic36c

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There are different classes of National Insurance.

There are three key identifiable national insurance classes. The type you pay depends on your employment status and how much you earn, and whether you have any gaps in your National Insurance record.

Employed

Self employed

Voluntary workers

The thresholds and rate of national insurance contribution by individuals are detailed in the attached tables

The class you pay depends on your employment status and how much you earn, and whether you have any gaps in your National Insurance record.

National Insurance class Who pays

Class 1 Employees earning more than £155 a week and under State Pension age - they’re automatically deducted by your employerClass 1A or 1BEmployers pay these directly on their employee’s expenses or benefits

Class 2Self-employed people - you don’t have to pay if you earn less than £5,965 a year (but you can choose to pay voluntary contributions)

Class 3 Voluntary contributions - you can pay them to fill or avoid gaps in your National Insurance record

Class 3A Voluntary contribution - you may be able to top up your pension with a single lump sum if you’re due to retire before 6 April 2016

Class 4 Self-employed people earning profits over £8,060 a year

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Inheritance planning using trusts

https://www.youtube.com/watch?v=IEA8JEDaNqg

Why does Starbucks pay so little tax? - MoneyWeek Investment Tutorials

https://www.youtube.com/watch?v=Th4fxMFRIt0

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Take Home Assignment

Explain how an investor who pays tax at the higher rate could re-structure his/her financial arrangements to minimise the burden of taxes associated with income, capital gains, inheritance and stamp duty and land.

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Something to Think About

1. Mr Ryan’s estate is worth £530,000 after he died during the tax year 2015/16

Calculate his inheritance tax for this tax year if his:

(i) Entire estate was passed on to his spouse

(ii) Entire estate was passed on to his children

(iii) Estate was shared equally between his spouse and his children

(2) Mr Robinson’s estate is worth £1.5m after his death during the tax year 2008/2009

Calculate his inheritance tax liability for that tax year if his:

(i) Entire estate was passed on to his spouse

(ii) Entire estate was passed on to his children

(iii) Estate was shared equally between his spouse and his children

Estates passed to spouses are inheritance tax free. So Mr Ryan’s wife will pay no inheritance tax.

His inheritance tax bill will be for tax year 2015/16

Inheritance Tax Rate is 40%.

£530,000 - £325,000 = £205,000

£205,000 x 40% = £82,000

Mr Robinson’s estate is worth £1.5m

His inheritance tax threshold for tax year 2008/2009 = £312,000

Inheritance Tax Rate is 40%.

£1,500,000 - £312,000 = £1,188,000

£1,188,000 x 0.40 = £475,200

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The pros and cons of buying Properties

https://www.youtube.com/watch?v=eJZ2LNFl_7A

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