Estate agent handing over keys to a client

Banking 101 –

So, How Much is Inheritance Tax?

Inheritance Tax (IHT) is a tax on the estate of someone who has died, including all property, possessions and money.


26th May 2021


What is the inheritance tax rate?

The current rate of IHT is 40% (tax year 2022/2023). This tax is applied when an estate's value is above a threshold described as the Nil Rate Band (NRB). The taxable part of any estate above the applicable threshold, after consideration of exemptions and allowances, will be subject to IHT death.


When do you pay inheritance tax? 

Inheritance Tax (IHT) must be paid by the end of the sixth month after the person's death. If the tax is not paid within this timeframe, HMRC will start charging interest. The executors can choose to pay the tax on certain assets, such as property, by instalment over ten years, but the outstanding amount of tax will still get charged interest.

Clients often ask wealth planners how to avoid inheritance tax, but this should not be the focus of your strategy. Good estate planning strategies can enable you to plan to place the right wealth in the right hands at the right times. Any IHT mitigation plan should consider your views on lifetime gifting, post-death legacy and your preferences regarding the use of suitable structures to give you control and flexibility.


How can I reduce the amount of tax paid?

Trying to reduce how much IHT is due on an estate is complicated. But, in short, you can reduce how much tax is paid by:

  • Reducing the value of your taxable estate 
  • Gifting during your lifetime, e.g., putting some assets into a trust for your heirs
  • Leaving your estate to your spouse or civil partner
  • Holding assets that are exempt from IHT on your death 
  • Leaving a legacy to charity

An experienced and qualified wealth planner can help you structure a plan that meets your goals and preferences lifetime access to capital or income, IHT efficiency, or legacy. 


Leave a legacy

Legacy is about leaving wealth for others. It's important to remember there are many more factors at play than inheritance tax mitigation in terms of legacy planning. Making a will is a fundamental first step. We believe advice is important.  

You should not start out with an objective of how to avoid inheritance tax. Instead, consider your circumstances and preferences and speak to an experienced Wealth Planner about creating a bespoke plan. 

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