Inheritance Tax (IHT) may have to be paid on the estate of the deceased person if it is over a certain amount. The current tax-free allowance is £325,000. After that, the tax payable is 40 per cent.
There is no IHT to pay on estates left to a spouse or civil partner. If one partner dies and has not used all of their £325,000 tax-free allowance, then this can be passed on to the surviving partner, giving them a higher threshold of up to £650,000 before IHT will apply.
Some gifts may be subject to IHT, even if they are made when you are still alive. What gifts are liable for IHT will depend on the value, the purpose, and when it was given. It’s best to look into the rules on IHT to make sure that any gifts you make won’t be subject to IHT. If there is IHT to be paid, it has to be done before probate is granted, in most cases. You usually have to pay IHT within six months of the death. On assets such as a house, you can pay IHT in instalments over ten years but interest will be charged.