IHT—the charge on death
Produced in partnership with Pria Mehta of Penningtons Manches Coopers LLP
IHT—the charge on death

The following Private Client guidance note Produced in partnership with Pria Mehta of Penningtons Manches Coopers LLP provides comprehensive and up to date legal information covering:

  • IHT—the charge on death
  • The charge on death
  • Explanation of terms
  • Territorial scope
  • The nil rate band
  • Exemptions
  • The rate of IHT
  • Potentially exempt transfers
  • Anti-avoidance
  • Gifts with reservation of benefit
  • more

The charge on death

The Inheritance Tax Act 1984 (IHTA 1984) sets out how a charge to inheritance tax (IHT) may arise when an individual dies. When a person dies, they are treated as having made a transfer of value equal to the value of their estate immediately before death. A transfer of value made by an individual, other than certain exempt transfers, is a chargeable transfer for IHT purposes and, depending on the value of the person's estate and the availability of any reliefs or exemptions, a charge to IHT may arise.

Explanation of terms

For the purposes of the IHT legislation, a person’s estate is the aggregate of all the property to which they were beneficially entitled immediately before death, less their liabilities, but not including excluded property and taking into account any relevant lifetime gifts (both as referred to below). Artificial debts and certain liabilities classified as non-deductible debts cannot be used to reduce the value of the estate.

It is important to be aware of the definition of 'excluded property', since such property does not form part of a person's estate for the purposes of the IHT charge on death, but does form part of their estate at other times. Excluded property includes reversionary interests in settled property satisfying certain conditions, decorations awarded (not purchased)