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The amount of inheritance tax you will have to pay is determined by the value of your estate in relation to the tax threshold. The amount you will owe is dependent on whether or not your estate is worth more than the inheritance tax higher rate band for that year.
If your estate does not exceed the threshold, you do not have to pay any inheritance tax at all. Conversely, if it exceeds this amount, then all assets over this amount are subject to a 40% charge on their current value. This works out as an effective rate of 20%.
This also means that any assets you leave in trust will be subject to inheritance tax. These charges apply to bequests left in your will, as well as gifts made during your lifetime under the provisions of the Inheritance Tax Act 1984 – see publication 921, Estate and Gift Taxes, paragraphs 1.8 – 1.10 for more information.
Individuals may leave up to £325,000 free from inheritance tax per person (in 2006/2007), but gifts that fall outside of this allowance can still help reduce an individual's liability by transferring money out of their estate before they die or they could choose to reduce their net worth by paying off debts.
If your estate does not exceed the threshold, you do not have to pay any inheritance tax at all. Conversely, if it exceeds this amount, then all assets over this amount are subject to a 40% charge on their current value. This works out as an effective rate of 20%.
This also means that any assets you leave in trust will be subject to inheritance tax. These charges apply to bequests left in your will, as well as gifts made during your lifetime under the provisions of the Inheritance Tax Act 1984 – see publication 921, Estate and Gift Taxes, paragraphs 1.8 – 1.10 for more information.
Individuals may leave up to £325,000 free from inheritance tax per person (in 2006/2007), but gifts that fall outside of this allowance can still help reduce an individual's liability by transferring money out of their estate before they die or they could choose to reduce their net worth by paying off debts.
