Do I need to pay inheritance tax?
If you're single and die during 2016-2017 with an estate worth more than £325,000 (including money, property and investments, but after deducting debts and expenses such as funeral costs), 40% tax will become due on anything above £325,000.
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 £500,000 and £325,000).
However, if you're married or in a civil partnership, you may be able to leave more than this before paying tax. From April 2016, the threshold will be higher if your estate includes a family home that you leave to your children.
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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 explained - this guide contains all the details you need to know about paying this tax.
Inheritance tax rule changes
In the 2015 Summer Budget, the chancellor George Osborne announced a new transferable main residence allowance, which will gradually increase from £100,000 per person in April 2017 to £175,000 per person by 2020/21.
This is in addition to the main nil-rate band. It will effectively raise the IHT-free allowance to £500,000 per person. Where married couples jointly own a family home and want to leave this to their children, the total IHT exemption will be £1m.