How Much Inheritance Tax Will I Pay?

Inheritance Tax (IHT) is a tax charged on the value of someone’s estate after they die. While many people worry that their loved ones may face a large tax bill, not every estate has to pay Inheritance Tax.

The amount payable depends on several factors, including the value of the estate, who inherits the assets, available allowances and whether any taxable gifts were made during the person’s lifetime.

How much is Inheritance Tax?

The standard rate of Inheritance Tax is 40%. However, this rate only applies to the part of an estate that exceeds the available tax-free allowances.

The basic Inheritance Tax allowance

Most estates can benefit from the nil rate band, which allows up to:

£325,000

to pass free from Inheritance Tax.

This means:

• the first £325,000 of an estate is not usually subject to IHT
• tax is generally only charged on the value above this amount

For example, if an estate is worth £500,000 and no other allowances apply:

• £325,000 is covered by the nil rate band
• the remaining £175,000 may be taxed at 40%

This would result in an Inheritance Tax bill of:

£70,000

Can you get an additional allowance for your home?

Some people may also benefit from the residence nil rate band if they leave their home to direct descendants, such as children or grandchildren.

This additional allowance can increase the amount that can pass free from Inheritance Tax, although eligibility depends on the circumstances of the estate.

What happens if you are married or in a civil partnership?

Assets left to a spouse or civil partner are usually exempt from Inheritance Tax.

In many cases, any unused allowances can also be transferred to the surviving spouse or civil partner. This means the survivor’s estate may benefit from a higher available allowance when they later die.

Are all estates subject to Inheritance Tax?

No. Many estates do not pay Inheritance Tax because:

• the total value of the estate falls below the available allowances
• assets are left to a spouse or civil partner
• additional allowances apply
• planning arrangements reduce the taxable value of the estate

However, understanding whether IHT applies can be complicated, particularly where property, investments, lifetime gifts or family circumstances are involved.

What can affect your Inheritance Tax bill?

The amount of Inheritance Tax payable can depend on:

• the total value of the estate, including property, savings and investments
• who receives the inheritance
• whether tax allowances can be claimed
• gifts made during the person’s lifetime
• any exemptions or reliefs that may apply

Every estate is different, and small details can have a significant impact on the final tax position.

How Attwells can help with Inheritance Tax and estate matters

Understanding Inheritance Tax can feel overwhelming, especially when dealing with the loss of a loved one or planning for the future.

At Attwells Solicitors, our team can help you understand how Inheritance Tax rules may apply to your circumstances. We can provide guidance on estate administration, help with the necessary tax forms and support you through the legal process.

If you are unsure whether Inheritance Tax may apply to an estate, or you would like advice on planning ahead, contact Attwells Solicitors today to discuss how we can help.