Inheritance tax(ITH) is levied on estates that are being passed on when a person has died as long as the value of the state is above a certain threshold .
Some large estates may be able to qualify for what is known as residence nil rate band(RNRB) ITH can be affected by the RNRB. The RNRB increases how much of an estate can be passed on to a direct descendant before IHT is levied.
For the current year RNRB can add £175,000 on to a person’s total threshold if the house in the estate is left to children.
The purpose of RNRB is to help individuals pass on their family home without incurring a tax liability in estates that exceed IHT threshold of £325,000. However, you only receive the full amount if your taxable estate including your property is less than £2m.
From £2m onwards RNRB is reduced and will not be available at all to those with estates exceeding £2.35m which will leave a hefty tax liability.
IHT is levied at 40%.
Families can reduce this to 36% if at least 10% of the estate is let to charity in a will.
If IHT is due it must be paid at end of sixth month after person dies.