Tax levied on property and money acquired by gift or inheritance
Inheritance Tax is a tax on the estate (the property, money and possessions) of someone who’s died.
There’s normally no Inheritance Tax to pay if the value of your estate
- is below the £325,000 threshold
- you leave everything to your spouse or civil partner, a charity or a community amateur sports club
If you’re married or in a civil partnership and your estate is worth less than £325,000, you can transfer any unused threshold to your partner when you die. This means their threshold can be as much as £650,000.
You can also benefit from the residence nil-rate band (RNRB) if you leave your residential property to direct descendants. The tax-free allowance, currently £125,000 will rise to £175,000 in 2020-21. A couple will be able to use two allowances along with their existing nil-rate band of £325,000 allowance. This means they will eventually be able to pass a £1m property to their children without attracting Inheritance Tax. Direct descendants include children, grandchildren, step-children, adopted and fostered children and their spouses or civil partners.
Inheritance Tax is charged on your estate at 40%.