My Macmillan

Tax on your estate

Inheritance tax

Some money from your estate may be taken by the state as inheritance tax. But a certain amount of your estate can be inherited tax-free. This is known as the tax-free allowance. The tax-free allowance is currently £325,000. However big your estate is, there is no tax on anything you leave to:

Transferable tax-free allowance

Your estate may be worth less than the tax-free allowance when you die. If this happens and you have a husband, wife or civil partner, the remaining proportion of your tax-free allowance (whatever you haven’t used) can be transferred to that person. This would mean that when they die, there would be a bigger tax-free allowance on their estate. This could potentially allow more money to go to people they name in their will.

If your estate is worth more than the tax-free allowance

You could consider putting more of your savings into a personal pension. Whatever is left in your pension is passed directly to whoever you nominate, without becoming part of your estate. Therefore it is normally outside the scope of inheritance tax. Since April 2015, using a personal pension has become a tax-efficient way to plan for inheritance. See our information about Pensions for more details. You may also want to look at ways you can make gifts in your lifetime.

Lifetime gifts

Making gifts during your lifetime can reduce the value of your estate when you die. This reduces the inheritance tax on it.

A gift can mean:

Some lifetime gifts are tax-free, while others are only tax-free if you live for seven years after making them.