Calculating Inheritance Tax liability can be tricky. Online tools, such as IHT calculators, may help those in the process of estate planning as well as beneficiaries of an estate. What can Inheritance Tax calculators show and how do they work?
Why are Inheritance Tax Calculators Useful?
These calculators allow individuals to estimate their potential liability for Inheritance Tax. Some use a calculator to help them with their estate planning; others will use them after a death. They can give an idea of whether assets may be at a level high enough for Inheritance Tax to be paid and, if they are over the nil rate band allowance, how much may be payable.
How do Online Inheritance Calculators Work?
These tools vary in terms of the services they offer. Some give a simple calculation; others may go into more detail. A standard calculator may, for example:
- Add up the value of the estate (i.e. property, savings and cash, investments, insurance and vehicles).
- Add up any outstanding debts/liabilities that the individual left (i.e. mortgages, loans, credit cards, bills and funeral expenses).
- Subtract debts/liabilities from assets and then calculate any Inheritance Tax liability that the estate may have.
Some calculation tools may open up the estimate given and may incorporate other elements of the Inheritance Tax process. Married couples and civil partners, for example, may have the ability to transfer allowances to the surviving spouse/partner when the first one dies. Some calculators can take this transfer into account and add it to the calculation.
Where to Find Inheritance Tax Calculators
Many financial information sites and companies operating in this sector offer an Inheritance Tax calculator. The insurance company Aviva, for example, has an online tool that can calculate assets and liabilities and that can take spousal/civil partner transfers into account. The financial website, thisismoney.co.uk, also offers a useful calculator although this is based on the individual threshold and does not include transfers.
It is worth remembering that the results given by Inheritance Tax calculators, even though they may be mathematically accurate, may not give a complete result. This depends on the information that is entered and other factors, such as gifts and trusts, that may affect tax liabilities. Those in doubt should consult a specialist in this field.
Readers that are looking into their Inheritance Tax liabilities, either as part of the estate planning process or as an executor of an estate, may also find the following articles useful:
- What is Inheritance Tax and How Does it Work?
- Inheritance Tax Thresholds: Married Couples & Civil Partnerships
Sources: Aviva (Inheritance Tax Calculator); moneyfacts.co.uk (Inheritance Tax Calculator). Accessed online 8th June 2010.
Carol Finch - Carol Finch is the Topic Editor for Retirement Planning, Budgeting, E-Commerce & Technical/Business Writing on Suite101.
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