Inheritance Tax (“IHT”) is a tax payable when an individual passes away, should the value of their estate exceed their tax-free allowances, and should their assets not be exempt from IHT. If payable, IHT is charged at a rate of 40%.

The Allowances

• Nil-Rate Band (“NRB”) Each individual in the UK has a tax-free allowance of up to £325,000 known as the NRB. Should an individual make any gifts in the 7 years prior to their death, the amount of NRB available will be reduced accordingly.

• Residential Nil-Rate Band (“RNRB”) In addition, if an individual passes away on or after 6 April 2017, their estate may also be entitled to a RNRB of up to £175,000 provided they leave a property they have owned to a ‘lineal descendant’ (e.g. children or grandchildren) on their death. The amount of RNRB available is capped at the value of an individual’s interest in their property. For example, should an individual own a property worth £100,000, they will only qualify for a RNRB of up to £100,000. The RNRB is also tapered on estates that are valued over £2m; for every £2 that an estate is over £2m the RNRB is reduced by £1. Relief/s Exemptions

In addition to the NRB and RNRB, some assets are exempt from IHT or attract relief from IHT, meaning no (or a reduced rate of) IHT will be payable on those assets. The exemptions include:-

1. Business Relief
2. Agricultural Relief
3. Charitable Gift Exemption
4. Spousal / Civil Partner Exemption

Spouses & Civil Partners

Assets passing to a surviving spouse or civil partner on death are exempt of IHT. Further, on the death of the second spouse or civil partner, they will be entitled to their own tax-free allowances, together with their late spouse’s or civil partner’s unused allowances.

Need further help?

Inheritance tax can be complicated, so we recommend you speak with a member of our friendly team if you would like any further help and support. For more information, see our Wills & Probate page, or call today on 01482 324252 for a no obligation chat.