Inheritance tax is charged on transfers of capital by or to individuals. It can be charged on certain lifetime gifts, on assets at death, on certain transfers into or out of trusts, and on transfers made by companies. Individuals who live in the United Kingdom are chargeable to inheritance tax on the disposal of property anywhere in the world. Non-UK individuals are chargeable on UK property held directly by them. Generally, the first £325,000 of the value transferred on death is not taxable, the rest being taxed at 40%. Where spouses or civil partners share the transaction, each has the relief.
Where one spouse dies leaving a chargeable estate to the other, no tax is due on the transfer to the surviving spouse. The relief is also transferred such that on the second death the relief is £650,000. Where domestic property forms part of the estate then the relief can be up to 1 million on the second death.
Gifts to charities can reduce the tax charge by 4916 but be wary of this provision as more may be paid to the charity than is saved on the tax.
Lifetime transfers of capital are usually not charged to this tax after the expiration of seven years.