Inheritance Tax Jargon explained


Inheritance tax is ensnaring more people than ever due to ever increasing house prices.

The tax man has revealed record IHT takings in the year to April 5, 2018 of £5.2 billion.

But the rules are so complex chancellor Phillip Hammond is considering wholesale changes to the way IHT is calculated and collected.

The rules also come with a whole load of jargon that makes them even more difficult to understand, so here are some of the most frequently used terms explained in plain English.

  • Administrator –Someone appointed to disperse the estate of someone who dies without a will
  • Asset –Someone’s property, money or possessions that have a value attached
  • Beneficiary –A person receiving an asset from a will or trust
  • Bequest –An asset left to a beneficiary
  • Executor –A person or persons charged with carrying out the terms of a will
  • Estate –All the assets of a deceased person after debts
  • Gift – An asset given away by the deceased before they die
  • IHT –Inheritance Tax, which is charged at 40% on the value of the estate
  • Intestacy –a set of rules that determines how an estate is dispersed if someone dies without a will
  • Main residence nil-rate band– A tax-free allowance of £150,000 from April 2019, rising to £175,000 in April 2020 applied when someone passes their main home to a direct descendant. This amount can double for a couple.
  • Mirror wills– Identical wills mainly for passing assets between couples
  • Nil-rate band– The amount someone can pass to others before IHT is due. The threshold is currently £325,000, but can double for a couple to give a total IHT tax-free threshold of £1 million when the main residence nil-rate band is added
  • Personal representative –The person responsible for sorting out a dead person’s estate. If they left a will, the representative is called an executor, if not, they are an administrator
  • Probate –The process of dispersing someone’s estate when they have died
  • Seven-year rule –The time before death when IHT is charged at a reduced rate on gifts
  • Taper relief– The scale for deciding the rate to charge IHT under the seven-year rule
  • Will –A legal document that lists how a person wishes their estate to be dispersed after death

Find out more about Inheritance Tax

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