What is the Inheritance Tax threshold?
Inheritance Tax (IHT) is charged on the value of everything owned by your client after their death, in excess of the Nil-Rate Band (NRB) – which is a tax-free allowance, currently set at £325,000 per individual and £650,000 for married couples and civil partners.
Legislation introduced in 2016 offered qualifying estates an additional tax-free allowance known as the Residential Nil-Rate Band (RNRB), which was phased in over four years and now provides a further £175,000 per individual – on top of the standard NRB threshold. However, there are limitations on which estates are entitled to this additional threshold, and the relief is tapered for estates valued at over £2 million.
Any value in excess of the NRB, and the RNRB if relevant, is taxed at 40% – and the nature of this tax means that their beneficiaries are left to pay the bill. Added to this, rising house prices mean that more families than ever before are falling into the inheritance tax trap – which underlines the importance of careful inheritance tax planning.