Inheritance Tax (IHT)
What is Inheritance Tax?
Inheritance Tax is the tax that may be due on someone’s estate — their property, money, and possessions — after they pass away. It only applies above certain thresholds, and with the right advice, there are ways to reduce it.
How much Inheritance Tax do I pay?
In the UK, Inheritance Tax is generally charged at 40% on the value of an estate above the tax-free threshold of £325,000.
There are a number of reliefs and exemptions, such as passing assets to a spouse, civil partner, or charity, or using the residence nil-rate band – which can reduce the amount owed.
With the right planning, many estates pay less than expected, and in some cases no Inheritance Tax at all.
How we can help
Our tax advisers can help you plan ahead to reduce the amount of Inheritance Tax your estate may owe.
They’ll review your situation, explain the rules, and guide you through options such as making lifetime gifts, using exemptions and reliefs, or structuring your estate more efficiently.
With the right advice, you can protect more of your wealth for your family and ensure everything is handled correctly.
FAQ
What is inheritance tax?
Inheritance tax (IHT) is a tax on the estate (property, money, and possessions) of someone who has passed away. It’s assessed before assets are passed on to beneficiaries.
Who actually pays inheritance tax?
You don’t have to worry about paying it personally as a beneficiary. The responsibility usually falls on the estate itself. The executor (if there’s a will) or an administrator (if there isn’t) makes sure any inheritance tax is settled before assets are passed on.
How much inheritance tax could be due?
The standard rate is 40%, but only on the value of the estate above the current tax-free allowance of £325,000. This means if the estate is worth less than that, no inheritance tax is due.
Are there ways to increase the tax-free allowance?
Yes. If you leave your home to your children or grandchildren, you may benefit from an extra allowance called the residence nil-rate band. This can reduce the amount of inheritance tax that might be owed.
Can giving gifts help reduce inheritance tax?
Absolutely. Many people choose to give gifts during their lifetime to help reduce the size of their estate. Some gifts are completely tax-free right away (like small annual gifts or wedding gifts), while others only become tax-free if you live for seven years after giving them.
What if the estate is below the threshold?
If the estate is valued under the allowance, no inheritance tax will be due. However, it’s still important to go through the proper steps to value the estate and complete the paperwork.
Is inheritance tax the same as probate?
No, they’re two different things. Probate is the process of managing and distributing someone’s estate after they pass away, while inheritance tax is simply the tax that might be due on the estate. Sometimes they overlap, but they’re not the same.
Do I need professional advice about inheritance tax?
Inheritance tax can feel complicated, but you don’t have to figure it all out on your own. Professional guidance can give you peace of mind, make sure everything is handled correctly, and help you take advantage of all the reliefs and exemptions available.
Speak with an adviser about Inheritence Tax
Contact us today and speak with a specialist to see how we can advise you on Inheritance Tax with our qualified tax advisers.