What is Inheritance Tax?
The value of your estate for the purpose of inheritance tax includes:
- your savings
- possessions including property
- pension funds (certain payments from payment funds may be subject to Inheritance Tax)
- subject to certain exemptions, the value of any money or property you gave away during the seven years prior to death
- If you leave your whole estate to your husband, wife or civil partner then no Inheritance Tax will be payable.
- If a husband, wife or civil partner doesn’t use all of their £325,000 tax-free limit, then any unused part can be passed on to their surviving partner.
- You don’t need to pay Inheritance Tax on anything you leave to charity. And if you leave 10% or more of your estate to charity, then a reduced rate of 36% tax may apply to what is left over. Special rules apply though so seek legal advice if you are planning to do this.
- Gifts of up to £3,000 in each tax year are exempt from Inheritance Tax, as are small gifts to individuals and some wedding or civil partnership gifts. But be aware that gifts made while you are alive could be liable for Inheritance Tax, depending how much they were and when they were given.