Inheritance tax is paid on the possessions you leave behind when you die. The standard rate of inheritance tax is 40%, but it’s not paid on everything.
Nothing to pay
You won’t pay any inheritance tax if any of these circumstances apply:
- You leave everything to your spouse or registered civil partner
- Your estate is worth less than £325,000 (the ‘nil rate’ band) these figures apply for 2020/21 and may change in the future.
- You choose to leave everything to a charity
Ways to reduce inheritance tax
You’ll reduce how much inheritance tax you pay in the following cases:
- On your death, you can transfer your ‘nil rate’ band allowance of £325,000 to your spouse or civil partner. That way, when they die they can leave up to £650,000 free of inheritance tax.
- If you leave your home to your children the ‘nil rate band’ can increase up to £500,000. This can also be transferred if you’re married or in a civil partnership.
- If you leave 10% of your estate to charity you’ll only pay 36% on some assets instead of the usual 40% rate of inheritance tax.
Actions you can take now
There are actions you can take now to reduce your exposure to inheritance tax:
- Make gifts during your lifetime.
- Use products that can help reduce the inheritance tax due on your death.