Inheritance tax is a tax on your estate (property, money and possessions) which is charged on your death. There will normally* be no IHT if your estate is worth less than £325,000, or you leave everything to your spouse or civil partner
This threshold of £325,000 is called the ‘nil rate band’. If you leave your estate to your children or other individuals, IHT will be applied at 40% on anything over the nil rate band. A married couple (or civil partners) can transfer their nil rate bands to each other so that they have a combined nil rate band of £650,000 between them*.
Since 2015 there has been an additional allowance, called the ‘residence nil rate band’ (RNRB), which you receive on top of the existing nil rate band when you pass on your main residence absolutely to your direct descendants (children, adopted and step children, and grandchildren). This allowance is £175,000 for each person which means that for some people there will be no inheritance tax charged on the first £500,000 of their estate (£325,000 + £175,000). For a married couple (or civil partners), this could mean that they could leave a property that is their main residence with a value of up to a million pounds without an IHT charge
If you'd like to discuss your particular situation in more detail, please contact us using the form below
* You may still have an inheritance tax liability if you have made any potentially exempt transfers (e.g. gifts to individuals not covered by exemptions) or have settled any lifetime trusts in the 7 years prior to your death