Inheritance Tax reminder: the basics of passing on your wealth

Inheritance Tax (IHT) is a tax charged on the value of a person’s estate when they die. An estate typically includes property, savings, investments, personal possessions and other assets held in the individual’s name.

Under current rules, there is usually no IHT to pay when assets pass to a surviving spouse or civil partner. However, when wealth passes to other beneficiaries, the value of the estate may be assessed for tax.

Each individual currently has an IHT allowance of £325,000, known as the nil-rate band. Estates valued above this threshold may be subject to tax on the excess.

The standard IHT rate is 40%, although this may reduce to 36% if at least 10% of the estate is left to charity.

In some cases, families may also benefit from the residence nil-rate band, which can provide an additional allowance of up to £175,000 when a main home is passed to direct descendants such as children, stepchildren or grandchildren.

Placing assets into trusts may help with passing on wealth while keeping a level of control, but this can be complex.

Planning ahead may help reduce the amount of tax due, but the rules are complicated. Seeking professional advice can help ensure you understand your options and make informed decisions for yourself and your family.

It is important to take professional advice before making any decision relating to your personal finances. Information within this article is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored advice and is for guidance only. Some rules may vary in different parts of the UK.