Inheritance Tax Rules
You may not need to pay inheritance tax, it depends on the size of your estate. If your estate is valued at less than £325,000, there’s normally no inheritance tax to pay. Only the value your estate above this threshold will be subject to the inheritance tax rate (currently at 40%) – but there are reliefs and exceptions.*
Not all exemptions are automatic. The Main Residence Nil Rate Band is used when passing your home (or a share of it) to your children or grandchildren. This is currently £125,000, but it will rise to £175,000 in 2020/21, and in future will increase further in line with the Consumer Price Index.
Spouses and civil partners do not need to pay inheritance tax on any money or property left to them by their spouse. Any unused threshold can be added to the surviving partner’s threshold. This means their joint threshold can be as much as £900,000.
Inheritance Tax Gifts
Making gifts which reduce the value of your estate while you’re still alive can lessen your inheritance tax bill. When thinking about giving away money or assets, you’ll need to make a record of what you gave, when, and who to.