Inheritance Tax

After a lifetime of hard work and sensible money management you might be planning to pass your wealth to close family and friends. But unless you have planned for it, Inheritance Tax (IHT) may take a large bite out of what you leave them.

Everyone is allowed to leave up to £325,000 (2009/2010) to his or her beneficiaries without incurring any IHT. This amount is known as the nil rate band. Any amount exceeding £325,000 could be taxed at 40%. Normally the passing of assets between spouses does not give rise to an Inheritance Tax liability.

Then the Chancellor announced that he would be introducing a new inheritance tax relief know as the transferable nil rate band.

In effect this relief means that if a spouse (or civil partner) does not use all of his or her nil rate band on the first death, the unused portion can be passed to the surviving spouse.

The nil rate band that is passed to the survivor is expressed as a percentage of that not used on the first death.

The percentage increase applies to the nil rate band at the date of death.

Use our Inheritance Tax Calculator to see if you could be affected by Inheritance Tax.