Inheritance tax (IHT) is typically levied on large estates when a person has died and is passing on their assets. The astronomical rise of property prices has meant that many families who would not have normally had to worry about IHT will need to pay the bill.
So, for example, if the estate is valued at £350,000, 40 percent will be charged on £25,000.
Funds from the estate can be used to pay the IHT to HMRC.
This will be managed and handled by the person dealing with the estate, who will be called the executor if there’s a will involved.
The beneficiaries (the recipients of the assets from the estate) will not normally pay tax on the things they inherit.
There are ways to reduce how much IHT is due but this can be complicated.
However, broadly it is possible to lower the bill by:
- Leaving a legacy to charity
- Putting the assets into a trust for heirs
- Leaving an estate to a spouse or civil partner
- Paying into a pension instead of a savings account
- Regularly giving away up to £3,000 a year in gifts