1. Inheritance tax is payable on the total value of the deceased person’s estate, which includes all cash, investments, properties deducting any debts owed including household bills and funeral expenses.
  2. If an estate is valued below the inheritance tax threshold of £325,000, there is no tax payable. Inheritance tax is payable at 40% on the value of the estate above the nil rate threshold.
  3. The tax rate is reduced to 36% if the deceased leaves 10% or more of their estate to a registered charity, either during their lifetime or in their will.
  4. Married couples and civil partners can transfer all of their assets to the surviving partner without paying any tax.
  5. Since October 2007, married couples and civil partners can also transfer any unused inheritance tax threshold to the surviving partner. This could double the inheritance tax threshold on the surviving partner’s estate to £650,000.
  6. Any gifts made within 7 years of death, will be automatically added to the value of the deceased’s estate in calculating the inheritance tax due.
  7. Certain gifts are exempt from inheritance tax, regardless of when they were made, including; (a) Small gifts of up to £250 made at any time to as many individuals as you like. (b) Annual gifts of up to £3,000 each year (either as a single gift or several gifts adding up to that amount). (c) Wedding and Civil Ceremony Gifts up to £5,000 for your children, up to £2,500 for your Grandchildren or Great Grandchildren or up to £1,000 for anyone else.
  8. You can easily create your own will to specify how you would like your assets to be distributed amongst your loved ones. You can also set up a discretionary will to allow your executors to make decisions based on tax efficiency or changes within the family.
  9. Typically, the executor or personal representative of a will be responsible for ensuring that inheritance tax is paid using funds from the deceased’s estate within 6 months after the end of the month in which the deceased passed away.
  10. It is possible to enter into an insurance policy that will pay out a lump sum on death, in order to cover the inheritance tax that may be due on the estate in order to avoid the necessity of selling off a valuable property. Alternatively, HMRC may allow you to pay yearly instalments over 10 years on certain assets such as a property.