The Inheritance Tax Guide


Several countries impose a tax on the givers of inherited wealth known as an inheritance tax. In contrast to estate duty, an inheritance tax is paid by the benefactor of a bequest rather than the deceased person’s estate. Inheritance tax is paid on the possession’s total value that a person leaves behind after passing away. It may also relate to some presents given to a person just before their death.

Your estate may consist of

  • Your home and any additional assets you may have.
  • Any investments or savings (certain kinds of pensions are excluded from your estate, but other investments, like ISAs, are still taxable).
  • Any extra assets.
  • The total value of the life insurance policy under your name.

If you’re married or have a civil partner, you can also leave your entire wealth to them without paying inheritance tax.

However, it may also be subject to the inheritance tax plan if you intend to leave a portion or all your assets to other family members and friends.

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Inheritance Tax Calculation 

Normally, there is no tax due if –

  • Your estate’s value is less than the nil rate band threshold of £325,000.
  • You delegate to your spouse or civil partner all responsibilities over the threshold.
  • If you leave anything over the exemption amount to a beneficiary like a non-profit organisation or a local recreational sports club.
  • Your threshold can rise to £500,000 if you give your house to your kids or grandchildren.
  • The portion of your estate above £325,000 threshold may be subject to tax at a rate of 40% if the value of your estate exceeds that threshold.

Inheritance Tax based on marital status


If you’re single and your estate is worth more than £325,000 everything over will be subject to over 40% inheritance tax.


But, if you are married or in a civil partnership, the assets you leave to your partner will be transferred without any inheritance taxes being due.

Moreover, leaving assets to your spouse doesn’t consume your nil-rate band. If any portion of your estate goes to someone other than your spouse or civil partner, it must be valued at more than £325,000.


When someone passes away, their unused nil-rate band should be given to their civil partner or spouse. For instance, if your partner left everything to you before passing away a combined nil-rate band of £650,000 will be applied to the value of your inheritance.

Unmarried couple 

If you’re part of an unmarried relationship, you’re still recognised as single for inheritance tax purposes. This means that upon death, each one of you will have a unique nil-rate band of £325,000 that cannot be combined.

Inheritance tax tips 

  • Give away some of your estates in the form of gifts. Gifts for holidays and festivals, for charities and universities.
  • Give away excess income which isn’t required for your daily expenses. This surplus income should be extra which doesn’t reduce your standard of living.
  • It is also possible to insure your prospective inheritance tax liability for assets like real estate that are challenging to give and put into trust.

Tax benefits can be received if the investment is done with proper planning and execution. Talk to a financial advisor for options to reduce your inheritance tax as much as possible.