IHT is a tax on everything of value left behind when a person dies, known as their estate. The rate of IHT is a flat 40% which will have to be paid by the heirs of the deceased. However, as is the case with income tax, there is a minimum level or threshold before any tax becomes due. Currently, if the estate is worth a maximum of £325,000 then it falls into the Nil Rate Band and no tax is payable.
On anything above £325,000, 40% tax will be due. For example, if your estate is worth £500,000 then £175,000 is taxable, which means £70,000 must be paid. The exception to this is the situation in which everything above the threshold is left to your spouse or civil partner or to a charity or other organisation that does not have to pay tax.