Don't make HMRC your biggest beneficiary.

By taking no action you could, inadvertently, end up making HMRC your biggest beneficiary.

Proper planning can help you pass on as much as possible to the people you choose by avoiding additional unnecessary tax charges.

Inheritance tax FAQs.

What is inheritance tax?

It's the tax paid on the value of assets passed on by a person when they die or as a gift when alive.

What is the Nil Rate Band?

The first £325K of a deceased’s estate is charged at 0%. This is known as the nil rate band and is the amount that can generally be passed on without being an inheritance tax bill. Anything above this could be taxed at 40%.

No inheritance tax is payable where you leave or gift anything to your (UK-domiciled) spouse or registered civil partner.

What is the residence nil rate band?

This is an additional inheritance tax-free allowance for ‘qualifying’ home owners with estates worth less than £2.35million that can result in you being able to pass on up to £500,000 when you die before inheritance tax has to be paid.

Why is a will important?

A will sets out who you would like to inherit, how much you would like them to get and whether it’s delayed or straightaway. It can also contain instruction that can reduce inheritance tax, for example by leaving money to charities. Visit our Wills page to find out more.

Six steps to mitigate inheritance tax

If your estate is worth more than your available nil band rate, you will usually have to pay inheritance tax. However, there are some steps you can take to ensure you don’t pay more than you have to:

  1. Make a will.
  2. Give assets away - there are lots of different types of different gifts so it's important to identify which are right for you.
  3. Set up a trust - done correctly, assets you place in a trust will fall out of your estate for inheritance tax purposes after seven years.
  4. Write your life policy in trust - provides readily accessible funds to pay an inheritance tax bill and avoids the life policy lump sum adding to the value of your estate.
  5. Take advantage of Business Property Relief (BPR) - once held for two years, assets that benefit from BPR won't form part of your estate for inheritance tax purposes.
  6. It's important to seek advice to ensure you are taking all available steps to reduce your inheritance tax bill. Please note, there is likely to be a cost from seeking advice. Please seek advice from your adviser if you already have one.