inheritance tax example
Here's an example of how inheritance tax could work if you had an estate worth £600,000 and qualified for the Residence Nil Rate Band.
Residence Nil Rate Band
Inheritance Tax Liability
With the inheritance tax threshold being £325,000, anything in your estate which is above that amount would be liable for inheritance tax.
If you are leaving your main residence to a direct descendant, you will also be eligible for the Residence Nil Rate Band, which is an additional £175,000.
This means that if your estate was valued at £600,000, you would have an excess of £100,000 which would be liable.
With the current inheritance tax rate being charged at 40%, this means your beneficiaries would have to pay 40% of £100,000, meaning your estate would have to pay £40,000 in inheritance tax.