What is inheritance tax or IHT?
A tax your estate pays at a flat rate of 40% on assets over a certain limit that you leave on your death. IHT can also apply to assets given away during your lifetime and may be payable by the person who receives a gift. The individual IHT threshold for the 2008/9 tax year is £312,000. This is also known as the ‘nil rate band’. As announced by the government in the 2007 Pre-Budget Report, with effect from 9 October 2007, if an individual’s nil rate band is not used up on their death, the unused proportion can be transferred to their surviving spouse or civil partner. This measure also applies to all widows, widowers and bereaved civil partners alive on 9 October 2007. So from this date, married couples and civil partners may combine their tax-free allowances to a maximum of £624,000, rising to £700,000 from 2010. Assets passed between spouses or civil partners are exempt from IHT, regardless of their worth and how soon you die after making them. These rules also apply to gifts made to
