Inheritance Tax Rules You Should Know

Inheritance tax (IHT) in the UK is a 40% tax on the value of the estate exceeding £325,000 when passed on after death.

Understanding how IHT works and planning accordingly allows your family to maximise the wealth passed tax-efficiently to your heirs. This guide covers the most important IHT rules and exemptions to factor into your estate planning.

IHT Taxable Estate Definition

IHT applies to your total taxable estate, which includes:

• Assets owned directly like property, cash and the majority of investments.
• Gifts made within 7 years of death above the annual allowance.
• Your share of assets held in joint accounts.
• IHT is payable on your worldwide assets, not just those held in the UK.

IHT Allowances and Gift Exemptions

Several key allowances and exemptions apply:

Annual Gift Exemption – Can gift up to £3,000 per tax year exempt from IHT.