Inheritance Tax threshold – how much is it? How you could boost your threshold

The current inheritance tax rate is 40 percent, which is only charged on the part of the estate which is above the threshold. The current threshold (which can also be known as a nil rate band) is £325,000, which means that estates below this level will not face any inheritance tax. For estates over £325,000, inheritance tax is charged on the part that is above that limit. So, for example, if an estate is worth £350,000 the 40 percent inheritance tax will be charged on £25,000 (£350,000 minus £325,000). 

The current £325,000 threshold has been frozen until 2020/2021, but the additional residence nil rate band is due to increase from £150,000 to £175,000 from 6 April 2020.

So from 6 April 2020 the total allowance for individuals (if they pass their home onto descendants) will be £500,000.

A person’s estate is valued once they die and it can take between six to nine months to complete.

Bigger or more complicated estates can take longer if they include trusts or other taxes.

DON’T MISS
How much Inheritance Tax do I have to pay? When does 40 percent rate of tax apply? [EXPLANATION]
Who pays Inheritance Tax on gifts? Why timing of gift can have a big impact on tax charged [INSIGHT]
From Inheritance Tax benefit to £1,150 tax relief – are you and your partner missing out? [ANALYSIS]

An estate doesn’t need to be valued straight away after a person dies. There are only deadlines if the estate owes inheritance tax (due to being worth more than the threshold).

If an estate is above the threshold inheritance tax forms will need to be sent within one year. To complete the process of valuing an estate, three main tasks need to be completed:

For the first task, certain organisations need to be contacted. Banks, pension providers, mortgage lenders, credit card companies and others will need to be contacted to find out what assets and debts the individual had. These organisations will need to be written to. A copy of a death certificate should be included within the letter and the value of the asset or debt should be requested.