Coronavirus has presented an unwelcome reminder of our own mortality and left many people scrambling to make sure their financial affairs are in order, including their inheritance tax (IHT) liability.
Everyone has an IHT allowance of £325,000, known as the nil-rate band. Any assets other than the family home over the £325,000 threshold are subject to IHT of 40 per cent. The value of the family home can be offset against the residence nil-rate band, which for the 2020-21 tax year is £175,000 per person, if it is left to direct descendants.
Transfers between married couples and civil partners are not usually subject to IHT, so if the first partner to die leaves their estate to the other, no tax will be payable. And the remaining partner can use the deceased partner's nil-rate band when they die, effectively doubling the threshold for this to £650,000 and the residence nil-rate band to £350,000.