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Finance: Inheritance tax in 10 numbers

PUBLISHED: 18:24 26 July 2016 | UPDATED: 18:24 26 July 2016

Knowing the tax boundaries will help redistribute your wealth to the maximum (Photo: Thinkstock)

Knowing the tax boundaries will help redistribute your wealth to the maximum (Photo: Thinkstock)


As the saying goes, death and taxes are life's inevitables. So when the two combine it's time for a good plan. Nic Kamintzis of St Albans-based financial planners KDW, outlines 10 key numbers we should all know

At KDW our clients often ask us about inheritance tax, they all want to make sure that their loved ones receive as much of their hard earned savings as possible. To give an insight into how inheritance tax works we would like to share 10 key numbers that you should be aware of.

0 per cent

Inheritance tax is not applied to any money or assets donated to charities, museums, universities or community amateur sports clubs.

7 per cent

If a person gifts a substantial amount of money or valuable assets and then dies within seven years, HMRC will include the gifts in the £325,000 tax threshold. The rate at which inheritance tax applies is reduced depending on the number of years since the money or asset was given in the following ratio of years to tax:

Less than three: 40 per cent

Three to four: 32 per cent

Four to five: 24 per cent

Five to six: 16 per cent

Six to seven: 8 per cent

10 per cent

If 10 per cent or more of the net value of an estate is left to charity then inheritance tax can be paid at a reduced rate of 36 per cent.

40 per cent

If your estate is worth over £325,000, then anything over that amount will be subject to a rate of 40 per cent inheritance tax.


Inheritance tax is not applicable on individual gifts worth up to £250. However, if you give an individual more than £250 the whole amount counts, not just the money after the first £250.


If a grandchild gets married you can gift them or their new spouse a lump sum up to the value of £2,500, free of inheritance tax.


There is an annual exemption of £3,000, which means an estate does not pay inheritance tax on any gifts up to £3,000 that are given away by the deceased in each tax year. If no money or assets are gifted in one tax year then it can be carried into the next tax year, however the maximum exemption is £6,000.


You are able to gift your children or their new spouse a lump sum up to the value of £5,000 when they get married, free of inheritance tax.


Everyone is entitled to pass on up to £325,000 of their estate (property, money and possessions) tax free. This is known as the nil rate band.


Married couples and registered civil partnerships have the allowance doubled, so the nil rate band is £650,000.

For more information and queries on inheritance tax planning, contact Nic Kamintzis at nic@kdw.co.uk or 01727 852299.

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