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
