What is Inheritance Tax (IHT) in the UK?
Inheritance Tax (IHT) is a tax paid on the estate (property, money, and possessions) of someone who has passed away. It is managed by HMRC and is typically charged at 40% on value exceeding tax-free allowances.
Tax-Free Allowances (Nil Rate Bands)
- Basic Nil Rate Band (NRB): The first £325,000 of your estate is tax-free.
- Residence Nil Rate Band (RNRB): An additional tax-free allowance of up to £175,000 applies if you leave a primary residential home to direct descendants (children or grandchildren), bringing the potential total tax-free threshold to £500,000.
Note: For estates valued over £2 million, the RNRB is tapered by £1 for every £2 of excess.
Action Plan: Check Transfer Rights
- Spousal Transfer: Unused nil rate bands can be transferred to a surviving spouse or civil partner, meaning a married couple can pass on up to £1 million tax-free.
- Estimate IHT Bills: Use our UK Inheritance Tax (IHT) & NRB Planner to estimate estate liabilities.
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