Inheritance tax (IHT) is most commonly encountered on a person’s death, although it extends beyond death to lifetime gifts and some other situations. Conceptually it is a tax on the transfer of wealth.
As all individuals have a “nil rate band” of £325,000 allowing assets up to that aggregate value to be passed on death before IHT becomes payable and because there are a number of available reliefs and exemptions, in practice IHT does not affect very many people. However, when it does become payable, as the rate is normally 40% of an asset’s value, the amount of tax to pay can be very substantial.
Data recently produced by HMRC (HMRC Tax & NIC Receipts, 24 April 2018) illustrates that receipts from Inheritance Tax, which have been steadily rising since 2009/10, have passed the £5 billion mark for the first time. With increasing levels of wealth held by an increasing number of people at the time of their death, the trend is set to continue.