Tax Tips - Inheritance Tax

These tips are guidance only and do not constitute specific advice. Detailed professional advice should be taken before action or refraining from action.

If the value of your estate exceeds the threshold (2010/2011 £325,000) your heirs could face a high IHT bill. Early IHT planning is essential, as assets, such as property, sometimes increase in value rapidly.

To reduce the value of your estate there are various gifts and bequests which do not create a tax liability. A maximum £3,000 can be gifted tax free each tax year by an individual. There are also various other small exemptions available.

If a gift exceeds the annual maximum it may count as a potentially exempt transfer. These are potentially exempt from IHT if the donor survives seven years, and no tax is payable at the time of transfer. However, if the transferor dies within seven years the amount transferred will form part of the estate for IHT purposes and tax payable on reducing sliding scale based on the length of time which has elapsed since the gift.