Inheritance Tax Basics
Inheritance Tax (IHT) is a tax on the estate of someone who has died. Not all estates pay inheritance tax, but as an executor or administrator, you need to understand the basics to complete the necessary forms and determine if tax is due.
- IHT threshold is £325,000 (nil-rate band) for 2024/25
- Additional residence nil-rate band of £175,000 may apply
- Tax rate is 40% on amounts above the threshold
- Gifts to spouses and charities are usually exempt
- Some gifts made in the 7 years before death may be taxable
- IHT must usually be paid before probate is granted
Do you need to pay inheritance tax?
Inheritance tax is only payable if the estate is worth more than the tax-free threshold. For 2024/25, the thresholds are:
- Nil-rate band: £325,000
- Residence nil-rate band: £175,000 (additional threshold for family home)
- Combined maximum: £500,000 per person
- Married couples/civil partners: Up to £1,000,000 combined
Inheritance Tax Checklist
Assessment and Planning
- Get professional valuations for all assets in the estate
- Check for gifts made in the 7 years before death
- Calculate total IHT liability using HMRC tools or professional help
- Complete appropriate IHT forms (IHT205 or IHT400)
Don't let IHT overwhelm you
Inheritance tax can seem complicated, but many estates don't actually pay any tax. HMRC provides helpful guidance and there are professionals who can help with complex situations.
Focus on getting accurate valuations first - this will determine whether IHT is even payable and how much you might need to pay.
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What If There's No Will (Intestacy Rules)
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Not sure if you need probate? Use this guide to understand the process and gather everything you'll need.