Inheritance Tax in the UK (2024-25) - Thresholds and Tips to Reduce Liability

Inheritance tax (IHT) is a tax on the estate of someone who has passed away, including their property, money and possessions. In the UK, this tax only applies if the estate's value exceeds a certain threshold, known as the nil-rate band.

For the tax year 2024-25, understanding these thresholds is crucial for effective estate planning. Many people wonder how much they will need to pay and what strategies they can use to reduce their tax liability. The rules surrounding inheritance tax can be complex, but knowing the key figures and allowances can help individuals make informed decisions about their financial legacy.

This blog will cover the current thresholds, any changes for the upcoming tax year and practical tips for minimising inheritance tax exposure. By being proactive, you can ensure that more of your wealth is passed on to your loved ones rather than going to the taxman.

What is an inheritance tax?
Inheritance tax (IHT) is a tax that is levied on the estate of a deceased person. This includes all their assets, such as property, money and personal belongings. In the UK, inheritance tax only applies when the total value of the estate exceeds a specific threshold, known as the nil-rate band. As of the 2024-25 tax year, this threshold is set at £325,000. If the estate's value surpasses this amount, it is taxed at a rate of 40% on the portion above the threshold.

Certain exemptions and reliefs can reduce the amount of inheritance tax owed. For instance, gifts made during a person's lifetime may not be taxed if they fall within specific limits. Additionally, there are special allowances for spouses and civil partners. Understanding inheritance tax is essential for effective estate planning, ensuring that more of your wealth can be passed on to your loved ones rather than being paid in taxes.

https://www.dnstax.co.uk/tax-advisors-near-me

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