Doncaster Office
Sheffield Office

The dreaded Inheritance Tax

13 June 2019

Lauren Smith

inheritance tax

Have you ever considered what happens to your assets when you die?

You work hard all of your life to save money, buy a house and own nice things in the hope that when you die you can pass these items down the generations. However, have you considered where the tax man comes in?

Depending on what assets you have when you die, you may find that your estate is liable to pay Inheritance Tax. So what can you do? There are ways to mitigate the amount of tax which is paid by your estate on your death but this does require careful planning.

What is Inheritance Tax?

 Inheritance Tax is a tax which is charged to an estate when a person dies. More and more estates are becoming subject to Inheritance Tax each year and even by those who don’t consider themselves wealthy, can find they are affected by it.

Inheritance Tax is only payable when your total estate is worth over £325,000. This threshold is known as the “Nil-Rate Band”. Any estate worth over the nil-rate band will be taxed at 40% - which can result in a hefty tax bill. However this nil-rate band also includes the values of gifts you may have made in the 7 years before your death, so it’s not as straight forward as it seems.

In addition, there are also various exemptions which mean your estate may not be liable to Inheritance Tax. One example of this would be when leaving your estate to your spouse or civil partner - here the whole value of your estate would pass completely free of Inheritance Tax. The same applies if you leave your estate to charity.

The £325,000 threshold is also transferable between spouses which means if your spouse or civil partner predeceased you and didn’t use all of their nil-rate band, this can be transferred for your use, possibly meaning that you could have a threshold of up to £650,000.

There is also a separate threshold which applies to property. This is called the “Residential Nil-Rate Band” and only applies in particular circumstances. Your estate can only claim the residential nil-rate band if you are leaving your property directly to a linear descendant (which includes your children and grandchildren). This can only be applied to your main residence where you lived. The residential nil-rate band is currently at £125,000 but is due to increase over the coming years.

How can I protect my assets?

 There are a number of ways in which you can significantly reduce your estate’s liability to Inheritance Tax.

Making a Will, will not only benefit you but also your beneficiaries on your death. Taking advice on your estate can reduce your inheritance tax liability meaning more of your estate goes to where you want it to.  

Inheritance Tax increase

According to STEP UK (the Society of Trusts and Estate Practitioners) in the last tax year, HMRC received a record £5.2 billion in Inheritance tax. This represented an 8% increase on the previous year.

What should you do?

Take advice – If you have any queries about Inheritance Tax or would like to arrange an appointment to discuss your Will then please contact Lauren Smith – Partner and Head of Wills, Trusts and Probate on 0114 272 1884 or email