Inheritance Tax: Do you know where you stand?

24 May 2021


Personal Tax Planning

Without the right advice, Inheritance Tax (IHT) can leave the beneficiaries of a person’s Estate with a significant tax bill at a time of emotional distress. While IHT receipts have generally significantly risen over the past decade, the latest statistics show that more than half of those over 55 are unaware of how any potential liability may be calculated, and nearly a third haven’t checked if the IHT rules would apply to them.

With the Organisation for Economic Cooperation and Development (OECD) reporting that IHT legislation should be reviewed to ensure that it does more to address the inequality of wealth as well as potentially seeking to raise further funds to tackle the growing public debt, it would appear an opportune time for individuals to consider some forward planning.

What is Inheritance Tax?

In the absence of any available reliefs, Inheritance tax is normally charged on an individual’s estate where the value exceeds £325,000. It’s charged at 40% and may also be charged on any gifts that an individual made in the seven years prior to their death. Typically the personal assets held by individuals upon death may include land and property, savings and quoted shares and chattels.

If the total value of the estate is less £325,000, you won’t need to pay IHT, but there may still be a requirement to report the taxable assets to HMRC.

The five year freeze

In this year’s Spring Budget, the Chancellor announced a freeze on tax-free allowances until April 2026 and it is estimated that, with modest inflation, this is likely to bring a further 11,000 estates within the scope of IHT from those who would currently be liable.

Planning ahead

Whilst everyone’s circumstances in regard to assets, intentions and family circumstances are very much bespoke and individual to the tax payer, some basic planning steps may include the following:

Spousal exemption

If you leave your estate to a spouse or civil partner, they shouldn’t have to pay IHT. Your Nil Rate Band may also be passed on to them.

Charitable donations

If you donate money to charity or leave money in your will for a charity, it is classed as ‘charitable legacy’ and won’t count towards your estate.

If you leave at least 10% of your net estate to a charitable organisation you may also reduce your IHT liability to 36% from 40%.


Whether it’s money, possessions or property, you can give away capital each tax year (worth up to £3000) without an IHT charge. Or, you can give as many gifts up to the value of £250 throughout the year, without having to worry about IHT.

Supporting you with IHT

IHT can add an extra layer of stress for family members in what is an undoubtedly emotional time. From calculating your liability, to helping to plan ahead, our private client experts can help alleviate the stress and place you in the strongest possible position. Get in touch to see how we can help.