Inheritance Tax is a tax on the estate (the property, money and possessions) of someone who's died.
There's normally no Inheritance Tax to pay if either:
You only have to pay Inheritance on any amount above £325,000 (this may change after 6 April 2021).
You can pass the whole of your estate on to your husband, wife or civil partner, or to a charity or community amateur sports club tax-free when you die.
You can also pass on your unused tax-free allowance to your wife, husband or civil partner, who can add it to their tax free allowance, meaning that when she or he dies, her or his estate will only incur Inheritance Tax if it's worth more than £650,000 (£325,000 + £325,000).
From 6 April 2017, you will be entitled to an additional £100,000 (rising to £175,000 by 2020-21) tax-free allowance to use against the value of your home -- but only if you leave your home to your children or grandchildren. If you die before your wife, husband or civil partner, this allowance can also transfer to them.
“This means by 2020-21, if you are married or in a civil partnership, you could leave your children and grandchildren a combined estate of up to £1 million without incurring Inheritance Tax."
The Money Advice Service (free and impartial advice provided by the government) is a good source of information about Inheritance Tax and other topics relating to financial planning.
Did you know?
There are ways to minimise the amount of Inheritance Tax your family will have to pay when you die, including Family Trusts and Protective Property Trusts.