Inheritance Tax
A tax on the estate (property, money and possessions) of someone who has died, charged at a standard rate of 40% on the value above the tax-free threshold of £325,000 (higher if a home is left to children or grandchildren). No tax is due if the whole estate is left to a spouse, civil partner, charity, or community amateur sports club.
Independent editorial summary — not the official statute text. Read the official version on legislation.gov.uk.
Government guidance sets out the basic threshold rule: 'There's normally no Inheritance Tax to pay if either:' 'the value of your estate is below the £325,000 threshold', or the whole of it above that threshold is left 'to your spouse, civil partner, a charity or a community amateur sports club.' Even where no tax is due, reporting may still be required: 'You may still need to report the estate's value even if it's below the threshold.' The threshold can also rise: 'If you give away your home to your children (including adopted, foster or stepchildren) or grandchildren your threshold can increase to £500,000', and unused threshold can pass between spouses or civil partners on the second death.
Above the threshold, the standard rate applies only to the excess, not the whole estate: 'The standard Inheritance Tax rate is 40%. It's only charged on the part of your estate that's above the threshold.' A lower rate rewards charitable giving: 'The estate can pay Inheritance Tax at a reduced rate of 36% on some assets if you leave 10% or more of the "net value" to charity in your will.' The tax is paid from the estate before beneficiaries receive their share, not by the beneficiaries personally: 'Funds from your estate are used to pay Inheritance Tax to HM Revenue and Customs (HMRC) ... Your beneficiaries (the people who inherit your estate) do not normally pay tax on things they inherit.' Gifts made in life are not automatically safe either: 'People you give gifts to might have to pay Inheritance Tax, but only if you give away more than £325,000 and die within 7 years.'
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Official sources
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