Inheritance Tax
The current rate of Inheritance Tax (also referred to as IHT) is 40% on estates worth more than £325,000.
Nil Rate Band
There is no IHT to pay on the first £325,000 of any estate. This is known as the `nil rate band`.
Spouse’s Exemption
All assets passing between spouses are also exempt from IHT. This is known as the ‘spouse’s exemption’.
Charitable Exemption
Gifts to charities and political parties are also exempt from IHT.
Transfer of Nil Rate Band
As assets passing between spouses are exempt from Inheritance Tax, they do not use up the Nil Rate Band. This then enables the estate of the second spouse to use their own Nil Rate Band, as well as the former unused Nil Rate Band. This effectively means two Nil Rate Bands can be used for the second spouse, up to £650,000.
The claim for this is made in the Inheritance Tax return, although there are a number of strict rules that need to be adhered to. It is advised that you seek assistance from a professional for this.
