Inheritance tax & estate planning

Inheritance tax (IHT) is a tax that applies to a person’s estate when they die i.e their property, money, and possessions. The standard Inheritance Tax rate is charged on the part of your estate that exceeds the total current threshold.

The inheritance tax current rate is 40% over and above the £325,000 threshold. This means if your total estate is worth £425,000. Inheritance tax would apply to the £100,000 over the threshold.
If your estate’s value is less than the nil rate band of £325,000 as of the date of your death, no inheritance tax is due.
Equally if you leave everything above the threshold to your spouse or civil partner or to an exempt beneficiary, like a charity or a community amateur sports club, it will be exempt from inheritance tax.
If you give away your home to your children or grandchildren, you can increase the threshold to £500,000.

When you plan your estate, you make provisions for the distribution of your assets after your death to the people you designate as beneficiaries or next of kin. This can be a tax-efficient way to transfer assets, letting you leave more of your estate to your loved ones.

The deadline for paying inheritance tax is the end of the sixth month following the deceased’s death. If there is a will, it is typically the executor’s job to handle the payment of this to HMRC. A beneficiary typically does not have to pay taxes on the inheritance they receive, but they may have to pay taxes on other aspects of their inheritance, such as if they now receive rental income from a property that was left to them.