Inheritance Tax

Inheritance Tax (IHT) is payable on transfers in excess of a threshold set at £325,000 for 2010/11 (and for the next four years) at a rate of 40%. However, the proportion of the threshold 'unused' on the first death of husband and wife (or civil partners) is effectively transferable to the surviving partner and serves to increase his or her threshold by the appropriate percentage.

Lifetime gifts attract reduced tax, if made up to seven years before death.

Certain gifts are tax free, including:

• Gifts between UK domiciled husband and wife or civil partners;
• Total gifts up to £3,000 in a year;
• Small gifts (up to £250 each);
• Gifts in consideration of marriage ranging from £5,000 from each parent of the couple, to £1,000 from anyone else.