Inheritance tax usually applies when a person dies and leaves their estate to someone else. That said, there are some exceptions to when their fortune is taxable, such as if the value of the estate is below the threshold, or depending on who the deceased has left their property, money, and possessions to. The current inheritance tax threshold is £325,000. Any part of an estate valued above this threshold is taxable, with the standard inheritance tax rate standing at 40 per cent. The estate may pay inheritance tax at a reduced rate of 36 per cent on some assets, however that’s only if the deceased leaves 10 per cent or more of the “net value” to charity in their will.
Some gifts you give while you’re alive may be taxed after your death
Gov.uk on inheritance tax
There are other instances in which a person may qualify for tax relief or exemptions.
This includes if a person gives a beneficiary a gift ahead of their death.
“Some gifts you give while you’re alive may be taxed after your death,” the government website states.
“Depending on when you gave the gift, ‘taper relief’ might mean the Inheritance Tax charged on the gift is less than 40 per cent.”
Other relief which exist includes Business Relief - which allows some assets to be passed on free of inheritance tax or with a reduced bill - and Agricultural Relief, which may apply if the estate includes a farm or woodland.
An individual should contact the Inheritance Tax and probate helpline for more information on this matter.
Inheritance tax: A beneficiary should alert HMRC to the inheritance even if it's below the threshold
