Inheritance Tax - the basics

Not everyone pays Inheritance Tax. It's only due if your estate - including any assets held in trust and gifts made within seven years of death - is valued over the current Inheritance Tax threshold (£325,000 in 2011-12). The tax is payable at 40 per cent on the amount over this threshold.

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 2011-12).

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 2011-12. 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.

Who is responsible for paying Inheritance Tax?

Inheritance Tax is payable by different people in different circumstances. Typically, the executor or personal representative pays it using funds from the deceased's estate.

The trustees are usually responsible for paying Inheritance Tax on assets in, or transferred into, a trust. Sometimes people who have received gifts, or who inherit from the deceased, have to pay Inheritance Tax - but this is not common.

Find out more about who pays in different situations in the guides below.

Date: 2015-01-29; view: 786