Inheritance tax is a tax that may need to be paid on your estate. It will need to be paid if the value of your estate is over a certain amount. It may also need to be paid on some gifts you make during your lifetime.
The amount of your estate that can be inherited without needing to pay tax is called the tax-free allowance. It is also called the nil-rate band.
This amount is set by the UK Government. At the moment, the tax-free allowance is £325,000. The Government will keep it at this amount until at least 2020–21.
Anything above this amount will have an inheritance tax charge of 40%.
If your estate is worth less than £325,000 after anything you owe is taken out, there won’t be any inheritance tax to pay.
However big your estate is, there is no inheritance tax on anything you leave to:
- your husband, wife or civil partner (in most cases)
- charities (in most cases).
If you own something jointly, your share will count as part of your estate. This means unless the person you own it with is your husband, wife or civil partner (in most cases), inheritance tax may need to be paid on it.