Skip to main content

Are there any exemptions or reliefs available for Inheritance Tax?

Are there any exemptions or reliefs available for Inheritance Tax?

Find Help

More Items From Ergsy search


Understanding Inheritance Tax

Inheritance Tax (IHT) is a levy in the UK on the estate of someone who has passed away. It includes all property, possessions, and money. The standard IHT rate is 40%, applied to assets above a certain threshold.

Many people seek ways to reduce the burden of IHT on their beneficiaries. Fortunately, there are several exemptions and reliefs available to help reduce this tax.

Nil Rate Band and Residence Nil Rate Band

The Nil Rate Band (NRB) is the amount up to which an estate has no IHT to pay. Currently set at £325,000, it applies to all estates.

Alongside the NRB, the Residence Nil Rate Band (RNRB) offers additional relief. It’s designed for those leaving their home to direct descendants, adding up to £175,000 additional relief.

Gifts and Exemptions

Gifting is an effective way to reduce IHT liability. Gifts to a spouse or civil partner are entirely exempt, regardless of amount.

Other gifts may become exempt if the donor survives for seven years after making them. These are often called potentially exempt transfers (PETs).

Small Gifts and Annual Exemption

The annual exemption allows individuals to gift up to £3,000 each tax year without it being added to the estate's value. This can be carried forward one year if unused.

Additionally, an individual can give up to £250 to as many people as desired each tax year. However, this cannot be combined with other exemptions.

Charitable Donations and Business Relief

Donations to charities are entirely exempt from IHT. This can be a way to support causes while also reducing tax liability.

For business owners, Business Relief offers a reduction in IHT for certain qualifying business assets. It can cover up to 100% of the value, depending on criteria.

Agricultural Relief

Agricultural Relief applies to working farmland and buildings, allowing for a reduction in IHT of up to 100%. The land must be used for farming to qualify.

This relief supports the continuation of farming operations by reducing the tax burden on heirs.

Conclusion: Planning is Essential

Clever planning can significantly reduce the impact of IHT on an estate. It’s beneficial to seek professional advice to maximize available reliefs and exemptions.

Keeping updated with current legislation is crucial, as rules and thresholds may change. Early planning helps hedge against future tax burdens.

Frequently Asked Questions

What is Inheritance Tax?

Inheritance Tax is a tax on the estate of someone who has passed away, including their property, money, and possessions.

What are exemptions to Inheritance Tax?

Exemptions to Inheritance Tax include transfers between spouses or civil partners, and gifts to charities, universities, and political parties.

What is the Nil Rate Band for Inheritance Tax?

The Nil Rate Band is the threshold below which no Inheritance Tax is payable on an estate. Currently, it is set at £325,000.

How does the residence nil rate band work?

The residence nil rate band is an additional threshold available when a residence is being passed on to direct descendants, such as children or grandchildren.

What is the spouse or civil partner exemption?

Assets left to a legal spouse or civil partner are generally exempt from Inheritance Tax.

Are there reliefs for small lifetime gifts?

Yes, you can give away up to £3,000 each tax year as gifts, which is known as the annual exemption, without it being added to the value of the estate.

What is a potentially exempt transfer (PET)?

A PET is a gift made during a lifetime that is not subject to Inheritance Tax if the person lives for seven years after making the gift.

Are there any reliefs for business assets?

Yes, Business Relief allows some estates to pass on eligible business assets free from Inheritance Tax or with a reduced rate.

Is agricultural property eligible for any relief?

Agricultural Relief can reduce the value of farmland and buildings used for agriculture that are part of the estate.

Can gifts to charity reduce Inheritance Tax liability?

Yes, gifts made to charities in a will are exempt from Inheritance Tax.

What is the difference between exemptions and reliefs in Inheritance Tax?

Exemptions completely remove some types of transfers from tax, while reliefs reduce the taxable value of an estate.

How does the use of trusts impact Inheritance Tax?

Trusts can be used to manage how and when beneficiaries inherit, potentially offering Inheritance Tax planning benefits.

Does Inheritance Tax apply to gifts made during a lifetime?

Lifetime gifts can become subject to Inheritance Tax if the donor dies within seven years of making the gift, unless exemptions apply.

Are there any specific exemptions for gifts on marriage or civil partnership?

Yes, gifts given in consideration of marriage or civil partnership are exempt up to certain limits, depending on the relationship to the recipient.

Do pensions have any effect on Inheritance Tax?

Pension funds are usually not considered part of an estate for Inheritance Tax purposes, but it's important to designate beneficiaries correctly.

Can previous gifts affect the amount of available exemption for Inheritance Tax?

Yes, previous gifts can affect how much Nil Rate Band is available at the time of death, especially within seven years of the donor's passing.

What is taper relief?

Taper relief reduces the amount of Inheritance Tax payable on certain gifts made within three to seven years before death.

Who qualifies for Inheritance Tax relief on national heritage property?

Certain properties and objects of national heritage may qualify for exemptions if kept available for public viewing and preservation.

Does the Inheritance Tax threshold change over time?

Yes, thresholds are subject to change, and it's important to stay informed about current tax policies outlined by the government.

How do life insurance policies affect Inheritance Tax?

Life insurance policies placed in trust may be kept out of an estate, potentially reducing Inheritance Tax liability for beneficiaries.

Useful Links

Useful Links : Are there any exemptions or reliefs available for Inheritance Tax?
Inheritance Tax - Macmillan Cancer Support

Information on inheritance tax exemptions and reliefs.
Inheritance Tax Planning - Age UK

Guide on how to navigate inheritance tax and potential exemptions.
Charitable Legacies and Inheritance Tax - British Heart Foundation

Explains how charitable legacies can affect inheritance tax.
Inheritance and Tax - Alzheimer's Society

Details on how inheritance tax works and applicable exemptions.
Reducing Inheritance Tax - Cancer Research UK

Information on reducing inheritance tax through gifts.
Inheritance Tax Explained - National Trust

Overview of inheritance tax and potential exemptions available.
Understanding Inheritance Tax - Marie Curie

Guidance on understanding inheritance tax reliefs and exemptions.
Important Information On Using This Service


This website offers general information and is not a substitute for professional advice. Always seek guidance from qualified professionals. If you have any medical concerns or need urgent help, contact a healthcare professional or emergency services immediately.

  • Ergsy carfully checks the information in the videos we provide here.
  • Videos shown by Youtube after a video has completed, have NOT been reviewed by ERGSY.
  • To view, click the arrow in centre of video.
Using Subtitles and Closed Captions
  • Most of the videos you find here will have subtitles and/or closed captions available.
  • You may need to turn these on, and choose your preferred language.
Turn Captions On or Off
  • Go to the video you'd like to watch.
  • If closed captions (CC) are available, settings will be visible on the bottom right of the video player.
  • To turn on Captions, click settings .
  • To turn off Captions, click settings again.

More Items From Ergsy search