Writing a will Inheritance tax - how much will I pay?
Changes in the inheritance tax (IHT) rules announced in October 2007 mean that many people no longer have to worry about inheritance tax on what they leave in their will.
- If you die during the 2011-12 tax year and your estate is worth less than £325,000 (including money, property and investments but after deducting any debts), you will pay no inheritance tax.
- If you die during the 2011-12 tax year and your estate is worth more than £325,000 (including money, property and investments but after deducting any debts), you will pay inheritance tax at 40%.
For example, if you leave behind an estate worth £500,000, the tax bill will be £70,000 (40% on £175,000 - the difference between £325,000 and £500,000).
Inheritance tax and married couples
However, married couples and civil partners are allowed to pass their possessions and assets to each other tax-free, and under the new rules the surviving partner is now allowed to use both tax-free allowances (providing one wasn't used at the first death).
This effectively doubles the amount the surviving partner can leave behind tax-free (up to £650,000 in the current tax year).
For more information on inheritance tax and wills, see our book Wills and Probate.