What is Inheritance Tax and does it apply to you?
- The value of your estate is below the threshold at which Inheritance Tax is applied, or
- You leave everything to your spouse or civil partner, or
- You leave everything to an exempt beneficiary, such as a charity.
What is the threshold for Inheritance Tax?
How much is Inheritance Tax?
- The amount on which inheritance tax will be charged is £275,000 (£600,000 minus the £325,000 threshold).
- At the general rate, the tax payable will be £110,000 (40% of £275,000).
- The general rate can be reduced to a rate of 36% on some assets if the deceased leaves 10% or more of the 'net value' to charity in their will.
- Annual £3000 allowance
- Normal expenditure out of income
- Lifetime direct gifts with no immediate IHT. Some lifetime gifts are subject to IHT (i.e. those made to discretionary trusts that are above the NRB), this is at a reduced rate.
- Taper Relief can mean that gifts given in the 7 years prior to the gift giver's death can result in a tax charge below 40%.
Pensions and Inheritance Tax
- Death benefits from a pension can be subject to Inheritance Tax if the estate has a legal right to the payment, or the member can dictate to whom any benefit is paid
- There is a lifetime transfer made of the death benefit when the member is in ill-health
- If you’ve taken your tax-free cash, but don’t spend or gift it before you pass away, it will be included within your estate and IHT may be charged
How to pay Inheritance Tax
- Applying for one online, or
- Filling out the form IHT422
When do you pay Inheritance Tax?
How much money can you give away without incurring an inheritance tax charge?
What is effective Inheritance Tax planning?
Where can I find more information on Inheritance Tax planning?
We can't help you manage how you use or gift your money, but we do have products and information that may help:
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