This is a tax on death of the value of all your possessions in excess of £325,000 for a single person. Or, in excess of £650,000 on the second death in a marriage or civil partnership. These amounts are normally referred to as the ‘Nil Rate’ Bands or Thresholds because the tax rate up to these limits is ‘Nil’. The rate of Inheritance Tax above the Nil Rate is currently 40%.
From the 6th April 2017, a further Residential Nil Rate can be used against the value of your main residence if passing to a direct descendant. This will be a child (including a step-child, adopted child or foster child) of the deceased, and their lineal descendants. Your inheritance tax liability can be substantially reduced by careful planning; this includes a correctly written and up to date Will, making gifts where appropriate, the use of Life Assurance and Trusts and, in certain circumstances, the use of Equity Release.