Inheritance Tax may need to be paid if the value of your estate is above a certain amount. It may also need to be paid on some gifts you make during your lifetime.
- The amount of your estate someone can inherit 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. The tax-free allowance is £325,000 until at least the tax year 2020-21.
- Anything above this amount may have an Inheritance Tax charge of 40%.
However big your estate is, there is no Inheritance Tax to pay on anything you leave to:
- your husband, wife or civil partner
- UK-registered charities.
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, Inheritance Tax may need to be paid on it.
Helen’s estate is worth £425,000 after everything she owes is taken out. The first £325,000 is free of tax. This leaves £100,000 that will be taxed at 40%. It means that £40,000 of Inheritance Tax will be paid from Helen’s estate.