How is the tax calculated?
Your estate is made up of the value of your assets. Assets can include your house and its contents, your personal belongings and any savings or investments you have. The Inheritance Tax Nil Rate Band is the amount of the estate on which there is no Inheritance Tax to pay. Inheritance Tax is paid on any estate over this amount. The threshold (i.e. top limit of the nil rate band) for 2009/10 became £325,000. The rate of tax is 40%, so it can really eat into the money you leave to your family. Inheritance Tax can also become due on gifts or transfers of assets during your lifetime. The estate is valued on the day after death. This means that, even if, say, house prices fall and a lesser amount is received on sale, the higher sum is used to calculate IHT.