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An elderly woman discussing the inheritance she will leave.

Inheritance Tax

A family standing outside their home.

What is Inheritance Tax?

Inheritance Tax is usually paid on an estate when somebody dies. It's also sometimes payable on trusts or gifts made during someone's lifetime. Most estates don't have to pay Inheritance Tax because they're valued at less than the threshold (£325,000 in 2013-14). The tax is payable at 40% on the amount over this threshold or 36% if the estate qualifies for a reduced rate as a result of a charitable donation.

A small plastic house on top of a stack of coins.

Increased threshold for married couples and civil partners

Since October 2007, married couples and registered civil partners can effectively increase the threshold on their estate when the second partner dies - to as much as £650,000 in 2013-14. Their executors or personal representatives must transfer the first spouse or civil partner's unused Inheritance Tax threshold or 'nil rate band' to the second spouse or civil partner when they die.

A ledger with writing in, a calculator and a highlighter all resting on bits of paper.

How do I avoid Inheritance Tax?

  • Make a Will
  • Arrange a Will Trust
  • Reduce the Estate whilst alive
  • Use Insurance Policies
  • Make Lifetime Gifts

Planning to avoid Inheritance Tax can be a complicated procedure requiring expert legal help. It needn’t be payable in many situations.

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