What is Inheritance Tax and does it apply to you?
- The value of your estate is below the Inheritance Tax threshold, or
- You leave everything to your spouse or civil partner, or
- You leave everything to an exempt beneficiary, such as a charity.
What is the threshold for Inheritance Tax?
How much is Inheritance Tax?
- The amount on which inheritance tax will be charged is £275,000 (£600,000 minus the £325,000 threshold).
- At a rate of 40%, the tax payable will be £110,000 (40% of £275,000).
- The standard rate can be reduced to a rate of 36% on some assets if the deceased leaves 10% or more of the 'net value' of their estate to charity in their will.
- Making use of the annual £3000 allowance
- Normal expenditure out of income. You can make regular payments to another person, for example to help with their living costs. There’s no limit to how much you can give tax free, as long as:
- you can afford the payments after meeting your usual living costs
- you pay from your regular monthly income.
- Lifetime direct gifts with no immediate IHT. Some lifetime gifts are subject to IHT (i.e. those made to discretionary trusts that are above the NRB), this is at a reduced rate.
- Taper relief can mean that gifts given in the 7 years prior to the gift giver's death can result in a tax charge below 40%.
Pensions and Inheritance Tax
- Death benefits from a pension can be subject to Inheritance Tax if the estate has a legal right to the payment, or the member can dictate to whom any benefit is paid
- There is a lifetime transfer made of the death benefit when the member is in ill-health
- If you’ve taken your tax-free cash, but don’t spend or gift it before you pass away, it will be included within your estate and IHT may be charged
How to pay Inheritance Tax
- Applying for one online, or
- Filling out the form IHT422
When do you pay Inheritance Tax?
How much money can you give away without incurring an inheritance tax charge?
What is effective Inheritance Tax planning?
Where can I find more information on Inheritance Tax planning?
Next steps
We can't help you manage how you use or gift your money, but we do have products and information that may help:
Need help?
Making decisions about finances is important so it’s worth making use of the guidance and advice services available.
Retirement guidance
Pension Wise from MoneyHelper
The government’s free and impartial service, offering guidance to make money and pension choices clearer.
To find out more or book an appointment online click below or call.
0800 138 3944
8am to 6.30pm, Monday to Friday.
Calls may be recorded and monitored.
Speak with us
Our colleagues in Cardiff are always happy to answer your questions or tell you about our retirement income products.
0800 048 2446
Monday to Friday
9am to 5pm
We may record and monitor calls.
Retirement advice
Retirement Advice Service from Legal & General
Our advisers are experts in retirement regulated by the Financial Conduct Authority, so you can trust them to provide impartial advice and a personal recommendation that’s right for you.
0808 304 9155
Our team is available between 9.00am and 5.00pm, Monday to Friday. Calls may be monitored and recorded.