Inheritance tax (IHT) is paid on death and there are many inheritance tax rules covering the financial process of transferring the estate of a deceased individual to their heirs. IHT itself follows these regulations:
- The first £312,000 of the estate's worth is in the nil-rate band and is not taxed.
- Estate worth in excess of this amount is taxed at a 40% rate.
- Inheritance tax rules also cover gifts over the 7 years preceding the death, although there are various exemptions and exceptions.
A significant portion of the inheritance tax rules are given over to the exemptions, such as:
- Potentially exempt transfers – PETs – which are gifts not subject to other exemptions. Over the course of seven years since they were given, the tax imposed on them reduces should the donor die, until after seven years they are exempt from IHT.
- Annual exemptions, small gift exemptions, gifts between spouses and gifts in consideration of marriage that all allow for a specified worth of gifts to be given.
- Charitable donations, and donations to political parties, are exempt.
Trusts and life assurance can also be used to avoid IHT being levied but they can be complex to handle and are not always reliably safe from inheritance tax.
If you are concerned about inheritance tax rules and how they may apply to your estate in the event of your death, then we can put you in touch with expert qualified UK financial consultants for a free, no obligation initial consultation. All you need to do is fill out the short enquiry form we provide on this website and they will get back in touch with you to discuss your situation.