Jargon Buster - Definition of Inheritance Tax (IHT)

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Inheritance Tax (IHT)

is a tax that is payable on a person's estate when they die or when a person's assets are transferred. Inheritance tax is payable if a person's estate is over a certain value, for example in 2008 this value is £312,000 and the tax payable is 40% on any amount over this value.

Using the above as an example, if you're estate was worth £500,000 and it was inherited by your children, they would pay 40% tax on £188,000 which is £75,200.

It should be noted that Inheritance tax is not applicable between man and wife.

There are certain measures that can be taken to avoid inheritance tax for different situations, for example you can avoid inheritance tax on a life insurance policy by writing it into trust for your nominated beneficiaries.

Please note that all definitions are intended for general guidance only. For official and current definitions you should always double check your policy wording.

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