Nil Rate Band
When a person dies, everyone has a Nil Rate band of the amount of assets that they can pass free of Inheritance Tax.
The Nil Rate Band is sometimes referred to the Inheritance Tax threshold.
Inheritance Tax is the tax payable upon based upon any assets exceeding the Inheritance Tax threshold or the nil rate band.
The current tax threshold for Inheritance Tax is £312,000. This means that £312,000 can pass to the beneficiaries free of tax.
If you are married, or in a Civil Partnership, if the first spouse or partner dies not fully utilising their threshold, then you can combine their unused threshold to yours. For example, when the first spouse dies and they decide to pass £100,000 to their children, then their unused allowance of £212,000 would be added to the threshold of the surviving spouse which thereby increases their to £524,000.
Anything passed above the threshold is taxed at 40%.
For most of us, the value of our houses take up the majority of the threshold. In these circumstances there is a strong possibility that some Inheritance Tax will become payable.
