What To Consider For Inheritance Tax Planning

HMRC figures show inheritance tax receipts reached £7.03bn in the 2023/24 tax year, an increase of 5% on the previous year.

How do inheritance tax allowances work?

Each individual has an inheritance tax nil-rate band. This is the amount they can pass on free of inheritance tax, either on their death or by making gifts in the seven years before their death.

There is also a residence nil-rate band of £175,000, which applies where the deceased’s home passes to their direct descendants.

Both allowances are transferable between spouses, meaning a married couple could pass up to £1m to their children or other descendants. Any amount above the available nil-rate bands is subject to inheritance tax at 40%, unless it qualifies for an exemption.