Inheritance tax (IHT) can sound complicated — but understanding the basics helps you plan wisely and protect more of your estate for your loved ones.
At Coastal Legacy, we help people across Hampshire, Fareham, Gosport, and Portsmouth create wills that not only reflect their wishes but also make the most of available tax allowances.
Here’s a simple guide to how inheritance tax works, who pays it, and how your will can make a difference.
What Is Inheritance Tax?
Inheritance tax is a tax on the estate (property, money, and possessions) of someone who has died.
In most cases, it’s only charged on estates above a certain value — known as the threshold.
The Current Inheritance Tax Threshold
As of now, inheritance tax in the UK applies to estates worth more than £325,000.
This is called the nil-rate band, meaning the first £325,000 of your estate is tax-free. Anything above that may be taxed at 40%.
However, there are several important allowances and exemptions that can significantly reduce the amount owed.
The Residence Nil-Rate Band
If you leave your main home to your children or grandchildren, you may qualify for an additional £175,000 tax-free allowance.
This means many families can pass on up to £500,000 tax-free — or up to £1 million for married couples and civil partners.
Spouses and Civil Partners
When one partner dies, everything left to the surviving spouse or civil partner is completely exempt from inheritance tax.
In addition, the surviving partner can inherit any unused allowance, effectively doubling the estate’s tax-free threshold.
Gifts and Charitable Donations
You can reduce your inheritance tax liability by making gifts or charitable donations during your lifetime or through your will.
- Gifts made more than seven years before your death are usually exempt from tax.
- If you leave 10% or more of your estate to charity, the inheritance tax rate on the rest of your estate can drop from 40% to 36%.
At Coastal Legacy, we can help you include these charitable clauses correctly in your will.
Other Allowances and Exemptions
You can also give smaller gifts without tax concerns, including:
- Annual exemption – you can give up to £3,000 per year tax-free.
- Small gifts – up to £250 per person, per year.
- Wedding gifts – up to £5,000 for a child or £2,500 for a grandchild.
These can be thoughtful ways to support loved ones while reducing future tax exposure.
How Your Will Can Help Reduce Inheritance Tax
A well-structured will ensures your estate is distributed efficiently, taking advantage of all available allowances.
It can:
- Ensure your assets are passed on in a tax-efficient way
- Use trusts to manage wealth and reduce exposure
- Reflect your wishes clearly to prevent future disputes or unnecessary costs
Our professional will writers will work with you to tailor your will to your circumstances, helping you protect your family’s financial future.
When to Review Your Will
Inheritance tax rules can change over time. If your estate has grown, or if you’ve bought a home or received an inheritance, it’s wise to review your will.
We recommend revisiting it every three to five years, or after any major life event.
Plan Ahead, Protect More
Understanding inheritance tax isn’t just about numbers — it’s about ensuring the people and causes you care about receive what you intend.
At Coastal Legacy, we make inheritance planning simple and stress-free, ensuring your will works in your family’s best interests.
👉 Contact Coastal Legacy today to discuss your will and inheritance tax planning across Hampshire.