Inheritance Tax is a tax levied on the estate of a deceased person in the United Kingdom. It is applicable to the value of the assets and possessions left behind by the deceased, and in certain cases, it may also apply to gifts made during the person’s lifetime. The tax is payable by the beneficiaries or executors of the deceased person’s estate.

When an individual passes away, their estate, which includes everything they owned, such as property, money, investments, and personal belongings, is subject to Inheritance Tax if its total value exceeds a certain threshold known as the “nil-rate band.” The nil-rate band is the threshold up to which no Inheritance Tax is payable.

If the estate’s value exceeds the nil-rate band, the excess amount will be subject to Inheritance Tax at the prevailing rate set by the government. The rate of Inheritance Tax can vary depending on the circumstances and the value of the estate. In the UK, there are generally two rates of Inheritance Tax:

Standard Rate: If the deceased’s estate is valued above the nil-rate band, it will be taxed at the standard rate, which is currently at 40%. This means that 40% of the value above the nil-rate band is payable as Inheritance Tax.

Reduced Rate: If the deceased has left at least 10% of their estate to charity, the standard rate can be reduced to 36%. This reduction aims to encourage charitable giving in wills.