Inheritance Tax Calculator
What is Inheritance Tax (IHT) in the UK?
Inheritance Tax is a tax on the estate (the property, money and possessions) of someone who’s died.
There’s normally no Inheritance Tax to pay if either:
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the value of your estate is below the £325,000 threshold (known as the "nil rate band"/"NRB")
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you leave everything above the NRB to your spouse, civil partner, a charity or a community amateur sports club
If you leave your home to your children (including adopted, foster or stepchildren) or grandchildren your threshold can increase to £500,000. This is known as the "residence nil rate band".
If you’re married or in a civil partnership and your estate is worth less than your threshold, any unused threshold can be added to your partner’s threshold when you die. This means that £1m can typically be passed on without any IHT being due.
The rate of IHT above £1m is 40%, however the actual tax rate, and the amount liable to tax, can be reduced in a number of ways.
If you believe you will have an IHT liability, you should seek financial advice on how best to prepare. You can contact us to arrange a free, no obligation chat here.
What strategies do you use to avoid or reduce IHT?
There are really 4 broad strategies for managing an IHT liability: spending, gifting, insuring, or investing.
Spending is our favourite - spend the money you have above £1m and not only will you enhance the life you lead, you'll also save 40% tax on anything you spend. That means that a £10,000 holiday saves your beneficiaries £4,000 in tax.
Gifting has many options. The simplest is to gift outright without any strings attached. This is cheap and allows you to see your family benefit from your money. If you are worried about gifting outright, you can also make gifts into Trust. Trusts are more complex and costly, but have a lot of additional benefits and flexibility which allow you to keep control of the money whilst still saving on tax. You must survive 7 years after making gifts to completely avoid IHT, unless the gifts are habitual and made out of excess income.
Is this calculator financial advice?
No. It gives a broad estimate based only on the figures you enter, and it knows nothing else about you. Inheritance tax depends on the structure of your estate, your marital status, gifts made in the last seven years, any trusts, and how your assets are owned. Business and agricultural assets are treated differently again, and the rules in this area have changed recently. Use this to work out whether the question is worth asking, not as the basis for a decision.
This calculator assumes you have correct details about gifts made within the last seven years, assets held in trust, business or agricultural property relief, or any interaction between your estate and your pension. Estimates are based on our understanding of current UK legislation and HMRC practice, which is subject to change.
Inheritance tax planning, estate planning, will writing and trusts are not regulated by the Financial Conduct Authority.
Levels, bases of and reliefs from taxation are subject to change and depend on individual circumstances.
Wilfredson's Limited is an Appointed Representative of New Leaf Distribution Limited, which is authorised and regulated by the Financial Conduct Authority (FRN: 460421).