Spousal Exemption

No IHT between spouses: Spouses can leave an unlimited amount to each other free of IHT on the first death. This amount will then be included in the survivor’s estate and subject to IHT on their death.

Nil Rate Band (NRB)

Allowance: Each individual has a nil rate band of up to £325,000, which is the maximum amount that can be left to anyone free of IHT.
Reduction: The NRB is reduced by any gifts made within 7 years of death, excluding exempt gifts like the annual exemption of £3,000.
Married Couples: If spouses leave their estates to each other, the surviving spouse may have two NRBs available, totalling £650,000.

Residence Nil Rate Band (RNRB)

Home Allowance: Allows you to leave up to £175,000 of your home’s value IHT-free to direct descendants. This is in addition to the NRB.

Conditions:
You must own a property at your death that you have lived in as your main residence.
The property must be left to direct descendants.
The allowance reduces by £1 for every £2 your estate exceeds £2 million.
Downsizing provisions allow claims for the RNRB if you sold your main residence before death.
Transferable:
Any unused RNRB can be transferred to a surviving spouse, potentially doubling the allowance.

Gifts to Charities

Tax-Free: Gifts to charities are exempt from IHT.
Reduced Rate: If you leave 10% or more of your estate to charities, the IHT rate is reduced to 36%.

Business Relief

Relief: Applies to interests in trading businesses, allowing them to pass either IHT-free or with a 50% reduction in tax.
Eligibility: Determined by HMRC based on the business’s circumstances at the date of death. The business must be trading for profit, not merely holding investment assets.
Trusts: Using a Trust in your Will helps to maximise the benefit of this relief.

Life Policies and Death in Service Benefits

Tax Efficiency: Placing these policies into trust can prevent them from being subject to IHT and from increasing the recipient’s taxable estate.
Benefits: This strategy can save up to 40% tax, retain the RNRB, and potentially remove the assets from the next generation’s estate for IHT purposes.

Gifting

Reducing Estate: To reduce your estate for IHT purposes, you must gift assets and survive for 7 years without benefiting from the gifts.
Advice: Gifts can be made outright or into trust, and professional advice should be sought to consider capital gains tax and other implications.

Your Will

Maximising Benefits: Your Will can be structured to maximise the tax benefits of these allowances and reliefs. Including a trust in your Will provides flexibility for your executors to claim these benefits effectively, especially if your estate or wishes are complex.