Inheritance Tax (IHT)
A tax charged at 40% on the value of an estate over the nil-rate band (currently £325,000 per person), with various reliefs and exemptions.
Most estates pay no IHT. The standard nil-rate band is £325,000 per person, with an additional residence nil-rate band of up to £175,000 where a main residence is left to direct descendants. Spouses and civil partners can transfer unused allowances.
A married couple can often pass on up to £1 million between them without IHT, depending on their estate. The estates that pay IHT tend to involve significant property values, business assets or investments.
Lifetime gifts may fall outside the estate after seven years (the 'seven-year rule'). Various reliefs (Business Property Relief, Agricultural Property Relief) reduce IHT on qualifying assets.