Inheritance Tax

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Inheritance Tax (IHT) may be payable on a person’s estate after they die. Not everyone has to pay it. It's only due if the estate is over the IHT threshold (currently £325,000).

Inheritance Tax is usually paid on an estate when someone dies, but may also be paid on trusts and gifts made during someone’s lifetime. Most estates don’t have to pay Inheritance Tax because the first £325,000 is exempt from IHT. This is known as the nil rate band. Tax is charged at 40% on the amount over £325,000.

When a spouse or civil partner dies, any unused part of their nil rate band can be passed on to their surviving partner. When the second person dies, their estate can benefit from this increased threshold.

Exemptions

Even if your estate is over the threshold, you can pass on assets without having to pay IHT. For example, your estate usually doesn’t have to pay IHT on anything you leave to a spouse or civil partner. Gifts of up to £3000 in each tax year are also exempted, as are small gifts to individuals and some wedding or civil partnership gifts.

Gifts to charities established in the United Kingdom, political parties, housing associations or for ‘national purposes’, eg a museum or university, are also exempt.

Read more about Inheritance tax (HMRC website)

Guide to benefits and money after a death (NI Direct)

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