Everyone has an inheritance tax (IHT) nil-rate band. If your estate falls within this band then it may be left to your chosen beneficiaries tax-free on your death. In addition, gifts to particular people (e.g. spouses/ civil partners and, in certain circumstances, children), gifts of certain types of assets (such as interests in a business or a farm) and gifts to charities may qualify for IHT relief.
If you think that the value of your estate might be such that IHT will apply, it is important to take professional advice when you write your will, to ensure that you consider tax efficient ways to plan your estate.
IHT rules are complicated, and the guidance below is a very brief and simple summary only.
IHT of 40% is paid on every penny in your net estate which exceeds your IHT threshold. IHT used to apply to only the wealthy in society, but due to the increase in the value of assets (property in particular) and the fact that the IHT threshold has been frozen for many years, far more people are now affected by IHT - many of whom may not expect it.
The IHT threshold is normally referred to as the “nil rate band”. This is the value of assets within your estate which is not subject to tax. The nil rate band is currently set at £325,000. Everyone has their own nil rate band. If you are married or in a civil partnership, your nil rate band can be “passed” to your spouse or civil partner when you die (if you do not ‘use’ it by leaving assets to anyone other than your spouse/ civil partner or exempt charities). This means that on the death of a surviving spouse/ civil partner they will have their nil rate band and the balance of your nil rate band to claim. As things stand, up to £650,000 may be claimed this way on second death. There is also an additional “residence nil rate band” which applies to the value of your home (your main residence). This only applies if your home is inherited by direct lineal descendants on your death and is set at £175,000 per person. Like the nil rate band, this can be passed to your spouse or civil partner if it is unused on first death.
For further information on inheritance tax and succession planning  click here