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Wisbech accountant explains inheritance tax

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In her fortnightly Barwell's Banter column, Nickie Barwell of Barwell Accountants, talks inheritance tax.

Inheritance tax is the tax that arises on the estate of a person when they die.

The tax, once calculated, is payable by the estate of the deceased, and not by the recipients of the estate.

Nickie Barwell (52865863)
Nickie Barwell (52865863)

So any tax due would be settled from the funds of the estate, normally by the executor appointed in the will of the deceased.

The estate consists of all assets, investments, savings and possessions, and there is no tax chargeable on the first £325,000 of the estate. Any value above £325,000 is taxable at 40%.

If the estate is left to the spouse or civil partner, community amateur sports club or a charity there would usually be no tax to pay.

If you are married or in a civil partnership and the estate is worth less than the exempt threshold, then the surplus of the threshold can be added to the remaining partner’s threshold.

Similarly, if you leave your home as part of your estate to your children (including adopted children, foster children or stepchildren), the threshold can increase to £500,000.

So this can mean that potentially up to £1m of estate can be left by a deceased couple to their children.

There are also other exemptions such as:


You can give away £3,000 worth of gifts each tax year (April 6 to April 5) without them being added to the value of your estate.

This is known as your ‘annual exemption’.

You can carry any unused annual exemption forward to the next year – but only for one year.

Each tax year, you can also give away:

Wedding or civil ceremony gifts of up to £1,000 per person (£2,500 for a grandchild or great-grandchild, £5,000 for a child);

Normal gifts out of your income, for example Christmas or birthday presents – you must be able to maintain your standard of living after making the gift

Payments to help with another person’s living costs, such as an elderly relative or a child under 18;

Gifts to charities and political parties.

Small gifts up to £250

You can give as many gifts of up to £250 per person as you want during the tax year as long as you have not used another exemption on the same person.

Gifts made prior to death

If there’s Inheritance Tax to pay, it’s charged at 40% on gifts given in the three years before you die. Gifts made three to seven years before your death are taxed on a sliding scale known as ‘taper relief”.

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