Smith Sutcliffe Solicitors

Inheritance Tax (IHT)

Inheritance Tax is a tax on the estate (the property, money and possessions) of someone who’s died.

There’s normally no Inheritance Tax to pay if either:

  • The value of your estate is below the £325,000 threshold (the Nil Rate Band) or

  • you leave everything to your spouse or civil partner, a charity or a community amateur sports club

 

The Residential Nil Rate Band

If you give away your home to your children (including adopted, foster or stepchildren) or grandchildren, your threshold will increase to £425,000.

 

The Transferable Nil Rate Band

If you’re married or in a civil partnership and your estate is worth less than your threshold, any unused threshold can be added to your partner’s threshold when you die. This means their threshold can be as much as £850,000.

 

Inheritance Tax rates

The standard Inheritance Tax rate is 40%. It’s only charged on the part of your estate that’s above the threshold.

" Example Your estate is worth £500,000 and your tax-free threshold is £325,000. The Inheritance Tax charged will be 40% of £175,000 (£500,000 minus £325,000)." 


The estate can pay IHT at a reduced rate of 36% on some assets if you leave 10% or more of the net value to charity in your will.

 

Reliefs and exemptions

Some gifts you give while you’re alive may be taxed after your death. Depending on when you made the gift  ‘taper relief’ might mean the Inheritance Tax charged is less than 40%.

Other reliefs, such as Busniess Relief, allow some assets to be passed on free of Inheritance Tax or with a reduced bill Agricultural Relief if your estate includes a farm or woodland.

 

 

 
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