The inheritance tax threshold is the limit on the worth of your estate above which you will be liable to be taxed when you pass away. The threshold of the nil-rate band is currently £312,000 – if your assets, including property, come to a total worth of over this amount then a tax of 40% will be put on the excess after your death.
It is worth keeping in mind that while house prices have been steadily increasing, the inheritance tax threshold has been advancing at a slower rate and not in line with property value rises. As such, more and more people are edging over the inheritance tax threshold and may now be liable for the tax on their assets.
There are several ways to avoid exceeding the threshold:
- Spousal exemption means that a spouse or civil partner inheriting an estate is not liable to pay IHT on it.
- Certain sums of gifts in the seven years leading up to death are exempt from IHT, such as up to £3,000 each year, smaller gifts of up to £250 per person per year, and wedding or civil partnership gifts.
- Charity and political donations are exempt.
- After seven years, gifts that would normally be subject for calculating the inheritance tax threshold become exempt. Note that some gifts, called gifts with reservation where the donor still benefits from the gift, will not be exempt from IHT.
By filling out a short enquiry form, you can get a free initial consultation from the Inheritance Tax Advisory Service professional financial consultants if you are concerned that you will be over the inheritance tax threshold, and may have to pay tax in the event of your death.