Inheritance Tax (IHT) is a windfall tax for the HM Revenue & Customs of 40% on any assets which you give to other people (other than spouses/civil partners and charities) during your lifetime or on your death above the individual exemption of £325,000.
Everybody is entitled to pass £325,000 of assets tax free. This amount is known as the 'Nil Rate Band' and the new Coalition Government has confirmed that the Nil Rate Band will be frozen at £325,000 until April 2015. For inheritance tax purposes your estate also includes any gifts (in excess of £3,000 per year) made 7 years prior to your death.
With careful planning, this tax bill can be reduced or even removed altogether. If you are concerned about the level of inheritance tax that your beneficiaries will be liable for, there are a number of things to consider:
gifts made during your lifetime will be inheritance tax exempt if you survive more than 7 years after making the gift
gifts to charities are exempt
gifts to spouses and registered civil partners are exempt
discretionary trusts can save £130,000 in inheritance tax
death benefit plans can save 40% of the lump sum
