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Inheritance tax - how much will I pay?

Learn about inheritance tax, how much you are likely to pay and the ways you can reduce the amount you owe.

In this article
Do I need to pay inheritance tax? Inheritance tax rule changes
Inheritance tax rules for married couples and civil partners  

Do I need to pay inheritance tax?

If you're single and die during 2019-20 with an estate worth more than £325,000, your heirs may face an inheritance tax bill.

Any of your estate above the £325,000 threshold will be taxed at 40%.

However, the threshold is higher if your estate includes a family home that you leave to your children or grandchildren.

If you're married or in a civil partnership, you may also be able to leave more than this before paying tax.

You can find out more in our guide: inheritance tax: thresholds, rates and who pays

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Inheritance tax rule changes

In the 2019-20 tax year, you can leave an additional £150,000 tax-free, provided your estate includes your main home and is being left to a direct descendant.

This is in addition to the main inheritance tax allowance.

It effectively raises the IHT-free allowance to £475,000 per person.

Where married couples jointly own a family home and want to leave this to their children, the total IHT exemption will be £950,000.

You can find out more in our guide to inheritance tax on property

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Inheritance tax rules for married couples and civil partners

Married couples and civil partners are allowed to pass their possessions and assets to each other tax-free and, since October 2007, the surviving partner is now allowed to use both tax-free allowances (providing one wasn’t used at the first death).

Where a full allowance remains, this effectively doubles the amount the surviving partner can leave behind tax-free without the need for special tax planning.

However, some people, whose partner died before 21 March 1972 will be caught by a loophole which means they don't get a 'double allowance'.

Find out more: inheritance tax for married couples and civil partners - this guide contains all the details you need to know about paying this tax.

 

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