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Inheritance Tax

Inheritance Tax (IHT) may be charged when a person gifts away any assets they have. This usually occurs on death but can also happen if someone passes on assets during their lifetime.

Inheritance Tax no longer impacts only the very wealthy. Rising house prices and a failure to increase the IHT threshold in line with house price growth has meant that more people than ever face the prospect of IHT. The amount of Inheritance Tax collected by the Government rose from just over £2 billion in 1999/00 to more than £3.25 billion in 2005/6.

The Inheritance Tax threshold for 2008/9 is £312,000* (couples are entitled to double this). Above this threshold Inheritance Tax is charged. Unlike income tax, IHT is charged at a flat rate of 40%, but there some exemptions – for example when leaving assets to a spouse or charity.

Many people want to take positive steps during their lifetime to reduce Inheritance Tax. The solution can usually be found by taking advantage of available exemptions, devising a properly structured Will and considering specific investments to reduce the potential liability.

The issues involved are complex and you are likely to need professional, competent and impartial advice. Our new article about Inheritance Tax, available in the Members Library, details the most important issues you should be aware of. We have also produced a Guide to Inheritance Tax. For your copy please click here.

*The threshold will stand at £325,000 for 2009/10 and £350,000 for 2010/11.