The latest Inheritance Tax (IHT) statistics show an additional 4% was added to HM Revenue & Customs receipts compared to the previous year. IHT is a tax payable when you die. Whether your beneficiaries have to pay it, and how much they’ll pay, is based on the value of your estate.
Your estate’s value is the value of the whole entirety of your assets. An asset is anything of value that is owned, for example; money, property, investments, businesses, possessions, payouts from life assurance not written under an appropriate trust, as well as any gifts made within seven years of your death. IHT is currently applied to estates worth more than £325,000, and will remain at this level until April 2026.
Surviving spouse When the value of your estate exceeds this limit, known as the ‘nil-rate band’, everything over the threshold is taxed at 40% (unless you’re leaving it to your surviving spouse, in which case no IHT needs to be paid).
For the 2021/2022 tax year, there is also a ‘residence nil-rate band’ currently worth £175,000. If applicable to your particular situation, this is added to your nil-rate band of £325,000 - so your estate could be worth up to £500,000 before any IHT is payable.