What is Inheritance Tax (IHT)?
Inheritance Tax is a tax that may be charged on the value of someone’s estate when they die. “Estate” usually means the property, money and possessions they leave. The rules can feel technical, but a few straightforward points make it easier to understand what matters when you’re planning for your family’s future.
Who pays? Estate and thresholds
Each estate has a tax-free allowance called the nil-rate band. As a broad starting point, estates up to the nil-rate band are not charged IHT; amounts above it may be taxed at the relevant rate. For the current nil-rate band, see gov.uk’s inheritance tax guidance [https://www.gov.uk/inheritance-tax]. If you’re thinking about thresholds, it’s best to check the official page for the up-to-date figures and any recent changes.
Transfers between spouses, civil partners and charities
Transfers between married couples and civil partners are generally exempt from IHT, so it’s common for couples to pass assets between them without a tax charge on death [https://www.gov.uk/inheritance-tax]. Gifts to charities are also usually exempt from IHT when left in a will or given outright [https://www.gov.uk/inheritance-tax]. These exemptions are important if you’re planning how to keep value within a family or support a charitable cause.
Gifts and the seven‑year rule
Gifts made during your lifetime can reduce the size of your estate, but the timing matters. A potentially exempt transfer (PET) becomes fully exempt from IHT if the donor survives for seven years after making the gift. If the donor dies within seven years, the gift may be subject to IHT and taper relief might apply [https://www.gov.uk/inheritance-tax/gifts]. There are also annual small‑gift allowances and specific exemptions (for example wedding gifts or regular gifts made from surplus income) that can be useful—see the government guidance for the full list [https://www.gov.uk/inheritance-tax/gifts].
Residence Nil‑Rate Band (RNRB)
If a home is passed to a direct descendant (children or grandchildren), an extra allowance known as the residence nil‑rate band (RNRB) can apply on top of the standard nil‑rate band. The RNRB is intended to help households passing on a family home; the current rules and amounts are set out in the government guidance [https://www.gov.uk/guidance/inheritance-tax-residence-nil-rate-band]. The RNRB has conditions (for example, it applies when the residence is inherited by direct descendants), so check the official guidance to see whether a particular situation qualifies.
Trusts and why they matter
Trusts are useful tools for managing how assets are held and passed on, but they bring their own IHT rules. Transfers into some types of trust can trigger an immediate IHT charge or periodic charges while assets remain in trust. For instance, certain transfers into trust may give rise to an immediate IHT charge of up to 20% and there are also ten‑yearly charges for some trusts—details and examples are on the government trusts guidance [https://www.gov.uk/guidance/trusts-and-inheritance-tax]. Because trusts vary a lot, they are an area where professional advice is commonly sensible.
Keeping clear records
Good paperwork makes life easier for everyone later on. Keep copies of:
– Wills and any codicils
– Titles and deeds to property
– Bank, investment and pension statements
– Details of outstanding debts and liabilities
– Records of gifts you make (who, what, when, and any valuations)
– Any trust deeds and advice you’ve received
Accurate records help executors value an estate, apply the correct allowances and, where needed, support relief claims.
When professional advice is sensible
For straightforward estates, the basic rules and official guidance can be enough to make sensible choices. But you should consult a regulated professional if any of the following apply:
– You own business interests, multiple properties or significant overseas assets
– You’ve already made substantial gifts or set up trusts
– You have a blended family and want to understand implications for different beneficiaries
– You’re unsure whether the residence nil‑rate band or other reliefs apply
A solicitor, chartered tax adviser or regulated financial planner can give tailored help. If you have complex circumstances, professional advice can clarify risks and options without promising a particular outcome.
Practical next steps
– Read the official IHT overview to check current allowances and rates [https://www.gov.uk/inheritance-tax].
– Make or review your will; ensure it reflects your wishes and nominated executors.
– Keep clear records of assets, debts and any gifts or trust arrangements.
– If your circumstances are complex, list questions and consult a regulated adviser for personalised guidance.
This article is general information
This article explains some common IHT concepts but does not constitute personalised tax, legal or financial advice. For decisions that affect your own circumstances, seek independent regulated advice.