Inheritance Tax

There are several effective ways to reduce your IHT exposure, including utilizing your annual tax-free gifting allowances, making gifts out of normal surplus income, utilizing trusts, or leaving a portion of your estate to registered charities. Because IHT planning often requires a balance between reducing tax and maintaining your own financial security, seeking professional advice is essential to tailoring a strategy that works for you.

Inheritance Tax is usually due within six months of the end of the month in which the person died. It is typically paid out of the deceased person’s estate by the executor or administrator of the will using funds from the estate. If the tax is not paid within this six-month window, HMRC may begin charging interest on the outstanding balance.

Every individual has a tax-free allowance known as the Nil Rate Band, which is currently frozen at £325,000. If you leave your main residence to your direct descendants (such as children or grandchildren), you may also qualify for the Residence Nil Rate Band, providing an additional £175,000 allowance. Married couples and civil partners can also transfer any unused allowances to each other, potentially creating a combined tax-free threshold of up to £1 million.