Inheritance Tax and Trusts

The information in this guide was last updated on 21/04/2017

Inheritance Tax (often called IHT) is paid on your estate after you die. But it’s not universal and most families will never need to pay it on behalf of their deceased loved one.

It depends on the size of your estate (after any debts have been taken off). Currently:

• your estate would pay 40% tax on anything above £325,000 Inheritance Tax threshold, known as the Nil Band Rate, or
• your estate could pay 36% of anything above £325,000, if you leave more than 10% of your net estate to charity.

That means that estates worth less than £325,000 pay no Inheritance Tax. Married couples and civil partners can transfer any unused Inheritance Tax allowance to the remaining partner when they die. This means the threshold for that partner can be raised to as much as £650,000 in 2017-2018. For more guidance on how the transfer works see GOV.UK Inheritance Tax - Leaving assets to a spouse or civil partner.

In addition, a new allowance called the Residence Nil Rate Band was introduced from April 6, 2017 starting at £100,000 and this can be added to the existing £325,000 Inheritance Tax threshold where a home (or the proceeds from a previous home) is left to children (including step, foster and adopted children), grandchildren or great grandchildren. More information about this is available at GOV.UK Inheritance Tax: residence nil rate band (RNRB)

Yes, you can give away gifts worth up to a total of £3,000 each tax year. You’re also allowed to give your family and friends gifts that aren’t subject to tax. These include gifts:

• between a husband and wife or civil partners both living in the UK
• to universities and qualifying charities
• given to people more than seven years before your death

worth up to £250, to an unlimited amount of people. For a full list of exempt gifts see GOV.UK Inheritance Tax - Gifts.