Inheritance tax is a tax which arises on the death of an individual. It is a tax on the estate, or total value of the money and property, of a person who has died.
IHT is affecting a rapidly growing number of people, and this is largely due to the increase in the value of residential property. Examples of assets that would form part of an estate are: your home, its contents, your car, your bank and building society accounts, any stocks and shares, your jewellery, any antiques you have collected and any other investments you have accumulated over your lifetime, including your share of any jointly owned assets.
An estate will be subject to IHT if, on death, it exceeds the individual Nil Rate Band. This figure is currently frozen at £325,000.
The new IHT Residence Nil Rate Band (RNRB) was introduced in April 2017. It is in addition to an individual’s own nil rate band of £325,000, and conditional on the main residence being passed down to direct descendants (e.g. children, grandchildren).
By 2020/21 families could escape IHT on up to £1M of their wealth. Each parent will have a nil-rate band of £325,000 plus a RNRB of up to £175,000.
IHT is often called a ‘voluntary tax’ as there are so many ways to avoid it.