Your Guide to Inheritance Tax

UK inheritance tax is a tax that is paid on an ‘Estate’. Generally speaking this is everything that you own at the time of your death, minus what you owe. At times, it can also be applicable to assets you have given away within your life time. These assets might include things such as property, money, investments or possessions of some description.

Does Everyone Have to Pay Inheritance tax?

Do you pay tax on an inheritance?

Inheritance tax is not applicable to everyone; there is a threshold that has to be reached before it comes into play at all. It is only payable on any excess above the threshold. It only applies to the taxable value of your estate, including any jointly owned assets held in some types of trusts. At the time of writing the threshold is £312,000 (2008-2009 tax year).

If you are reading this outside of the tax year 2008-2009 the threshold will most likely have changed. To find out the current inheritance tax (IHT) threshold at the time you are reading go to the Revenues and Customs website or the Direct Gov website.

If you are looking for an inheritance tax calculator then you can check out the one at This is Money UK

Transfers into Companies and Trusts

At the time of writing, if you transfer assets into companies and most trusts, they immediately become subject to IHT. This is applicable if they exceed the IHT nil rate band (taking into account the previous seven years chargeable gifts and transfers).

Avoiding Inheritance Tax Tips

Five tips on avoiding or reducing your IHT bill.

• Write a Will. You can design your will so that you and a spouse (if you have one) can use your full IHT allowance in the event of death. Having a will makes your wishes clear and puts a stop to your assets being divided up under the intestate rules. If you don’t have a will then sometimes even your spouse will not get anything.
• Get Married. What are you waiting for? – get hitched! Make an honest women of her, or an honest man of him. Currently anything you pass on to a spouse is free of IHT, so there are tax benefits to getting married.
• Use Trusts. There are several trusts available that can help you avoid or reduce your tax bill. We advise you to speak to a specialist in this area to explore them in more depth.
• Investments. Some investments such as certain shares are giving favourable treatment for the purposes of IHT.
• Spend Your Money. If you are worried about your wealth building up and being tax heavily, leaving less money for your loved ones when you pass on, then why not just spend it. Enjoy yourself, more if you are worried about your tax bill building up in the background. You have probably worked hard your whole life. Talk to your family and a tax expert and tell them your concerns and then plan to spend more and enjoy it while, making provisions for your loved ones, with the help of a specialist, at the same time.

Information and Advice on IHT

For up-to-date detailed information on inheritance tax, we suggest you visit the two main government websites listed earlier in this article. I have listed them below again for your ease of reference.

• Revenues and Customs
• Direct Gov






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