The short version: Inheritance Tax (IHT) is charged on what you leave behind when you die. If your estate is worth more than the threshold, the excess gets taxed before it passes to your beneficiaries.
When is it payable?
There’s a nil rate band, below which no IHT is due. If you’re leaving your home to direct descendants, there’s an additional allowance. Married couples and civil partners can combine their allowances. Check gov.uk for current thresholds.
Anything left to a spouse or civil partner is exempt. Gifts to charity are exempt too, and leaving enough to charity can reduce the IHT rate on the rest of your estate.
What about gifts?
If you give away assets more than seven years before you die, they’re usually outside your estate. Gifts made within seven years can still be subject to IHT, though the rate reduces the longer ago you made them.
Do you have to report it?
Even if no tax is due, the estate usually needs to be reported to HMRC. The executors are responsible for filing the paperwork and paying any tax owed.
Thinking about estate planning or dealing with a bereavement? We can help you understand what’s involved.
