SKI Inheritance Calculator Your UK Guide

Demystify UK Inheritance Tax How Our SKI Calculator Helps You Plan Your Estate and Secure Your Familys Financial Future

Planning for what happens after you're gone is one of the most thoughtful things you can do for your loved ones. A key part of this is understanding UK Inheritance Tax (IHT). It might sound complicated, but with the right tools, it doesn't have to be.

This guide will walk you through the basics of IHT and show you how our free SKI Inheritance Calculator can give you a clear estimate of your estate's potential tax bill. This simple step can empower you to make smarter financial decisions today, ensuring more of your hard-earned wealth passes to your family, not the taxman.

What is UK Inheritance Tax (IHT)?

Inheritance Tax is a tax on the 'estate' of someone who has died. Your estate is essentially everything you own, minus any debts you have.

Think of it like this: when you pass away, the government takes a look at the total value of your assets. If this value is above a certain tax-free limit, a 40% tax is charged on the amount over that limit.

Fortunately, everyone has a tax-free allowance, and there are ways to increase it. Understanding these allowances is the first step to effective estate planning.

Understanding the Key IHT Thresholds

There are two main allowances that can reduce or even eliminate an IHT bill. Our calculator automatically applies these for you.

• The Nil-Rate Band (NRB): This is the standard tax-free allowance for every individual. Currently, it is £325,000. This means the first £325,000 of your estate is not taxed.

• The Residence Nil-Rate Band (RNRB): This is an extra allowance you can get if you pass on your main home to your children, grandchildren, or other direct descendants. The current RNRB is £175,000.

Transferable Allowances

Crucially, if you are married or in a civil partnership, any unused portion of your NRB and RNRB can be transferred to your surviving partner when you die. This means a couple can potentially pass on a combined estate of up to £1 million tax-free.

Allowance Type	Per Person	Combined for a Couple
Nil-Rate Band (NRB)	£325,000	£650,000
Residence Nil-Rate Band (RNRB)	£175,000	£350,000
Total Potential Allowance	£500,000	£1,000,000

How Our SKI Inheritance Calculator Works

Navigating these rules can be confusing. The SKI Inheritance Calculator is designed to do the heavy lifting for you. It provides a straightforward estimate of your potential IHT liability in just a few minutes.

How to Use the Calculator: Step-by-Step

Our tool is simple. Just gather some basic financial information and enter it into the fields.

Your Inputs:

1. Marital Status: Select whether you are single, widowed, married, or in a civil partnership. This is key for determining transferable allowances.
2. Property Value: Enter the estimated current market value of your main home.
3. Savings & Investments: Add up the value of your cash, bank accounts, ISAs, stocks, and shares.
4. Other Assets: Include the value of other significant assets like second homes, cars, jewellery, or art.
5. Debts & Liabilities: Enter the total of any outstanding debts, such as a mortgage, loans, and credit card balances. You can also include an estimate for funeral costs.
6. Gifts Made in Last 7 Years: Input the value of any large gifts you have made in the past seven years. Gifts made within this period may still be counted as part of your estate.

Your Results (The Outputs):

Once you've entered your details, the calculator will instantly show you:

• Total Estate Value: The gross value of everything you own.
• Net Estate Value: Your estate's value after debts are subtracted.
• Available Tax-Free Allowance: The combined NRB and RNRB you are eligible for.
• Taxable Estate: The portion of your estate that is above the tax-free allowance.
• Estimated IHT Bill: A clear and simple estimate of the Inheritance Tax your estate may have to pay.

Worked Example: Meet Sarah and Tom

Sarah and Tom are married and want to understand their IHT position. They use the SKI Inheritance Calculator and input their details:

• Marital Status: Married
• Property Value: £600,000 (their main home, which they'll leave to their two children)
• Savings & Investments: £300,000
• Other Assets: £50,000
• Debts & Liabilities: £100,000 (remaining mortgage)
• Gifts: £0

The Calculator's Results:

1. Total Assets: £950,000 (£600k + £300k + £50k)
2. Net Estate Value: £850,000 (£950k - £100k)
3. Available Allowance: £1,000,000 (Combined NRB of £650k + combined RNRB of £350k)
4. Taxable Estate: £0
5. Estimated IHT Bill: £0

Because their net estate of £850,000 is below their combined tax-free allowance of £1 million, their children will not have to pay any Inheritance Tax. This gives them valuable peace of mind.

Common Mistakes to Avoid in Estate Planning

Using a calculator is a great first step, but it's part of a wider plan. Here are some common pitfalls to watch out for:

• Not Having a Will: Without a will, the law decides who inherits your estate. This might not align with your wishes, and you could lose control over tax-planning opportunities.
• Ignoring the '7-Year Rule': Large gifts made less than seven years before your death may still be included in your estate for tax purposes.
• Forgetting about Pensions: Most modern defined contribution pensions fall outside of your estate for IHT purposes. It's important to complete a 'nomination of beneficiary' form so the funds go to the right person.
• Not Reviewing Your Plan: Life changes. Marriage, divorce, having children, or a significant change in wealth are all reasons to review your will and estate plan.

What to Do After You Get Your Result

Your calculator result is a call to action.

If you have a potential IHT bill:

Don't panic! There are several legitimate ways to reduce it.

1. Make Lifetime Gifts: You can give away up to £3,000 each tax year without it being added to your estate. This is your 'annual exemption'.
2. Donate to Charity: If you leave at least 10% of your net estate to a registered charity, the IHT rate on the rest of your estate is reduced from 40% to 36%.
3. Set Up a Trust: A trust is a legal arrangement that can hold assets for your beneficiaries. When structured correctly, it can help ring-fence assets from Inheritance Tax.
4. Get Life Insurance: A 'Whole of Life' insurance policy, written in trust, can be set up to pay out a lump sum on your death. This sum is ring-fenced from your estate and can be used directly to pay the IHT bill, ensuring your home doesn't need to be sold to cover the tax.

If you do not have a potential IHT bill:

That's great news! However, it's still wise to:

• Write a Will: Ensure your assets go to the people you choose.
• Review Regularly: The value of your assets, particularly property, can rise over time and push your estate into the IHT bracket.

Protecting Your Family with Life Insurance and PMI

Estate planning is about securing your family's financial future. This forward-thinking approach should also apply to protecting your family and your health right now.

Life Insurance for IHT Planning

If the SKI Inheritance Calculator shows a potential tax bill, life insurance is one of the simplest solutions. By taking out a policy designed to cover the estimated IHT, you ensure your beneficiaries receive their inheritance in full, without the stress of finding cash to pay the tax bill. At WeCovr, we are experts in helping UK families find the right policies for their needs, ensuring they are correctly written in trust to be as tax-efficient as possible.

Protecting Your Health with Private Medical Insurance (PMI)

While planning for the long term, don't neglect your present well-being. Private Medical Insurance (PMI) provides peace of mind by giving you and your family fast access to specialists and high-quality medical treatment. This can be invaluable for getting you back on your feet quickly if you fall ill.

It is important to understand that UK PMI is designed to cover acute conditions (illnesses that are short-term and curable) that arise after you take out your policy. It does not cover pre-existing conditions you already have, or chronic conditions that require long-term management rather than a cure.

As a valued WeCovr customer, purchasing a PMI or life insurance policy can unlock discounts on other types of cover you may need. Furthermore, we provide complimentary access to CalorieHero, our AI-powered calorie and nutrition tracking app, to support your health goals.

Frequently Asked Questions (FAQ)

1. Can I just give my house to my children to avoid IHT? If you give away your home but continue to live in it without paying a market-rate rent, it is known as a 'gift with reservation of benefit'. HMRC will treat the house as if it's still part of your estate for IHT purposes.

2. What counts as a 'direct descendant' for the extra property allowance (RNRB)? This includes your children, grandchildren, and their spouses, as well as step-children and adopted or fostered children. It does not include nieces, nephews, or siblings.

3. Are ISAs exempt from Inheritance Tax? No. While ISAs are very tax-efficient during your lifetime (offering tax-free interest and growth), they form part of your estate for IHT calculations upon your death.

4. How can WeCovr help with my Inheritance Tax planning? While we don't offer tax advice, we are expert brokers who can help you find a cost-effective life insurance policy. This policy can be set up specifically to pay off your estimated IHT bill, making us a vital part of your overall estate planning strategy.

Ready to take control of your financial legacy?

Start by getting a clear picture of where you stand. Use the simple, free SKI Inheritance Calculator today. Then, contact our friendly team at WeCovr for a no-obligation quote to see how affordable it can be to protect your family's inheritance.