Inheritance Tax (IHT)
Effectively a form of death duties, which is a tax charged on what you leave behind (your estate) when you die.
How much tax might you pay
You have to pay tax at the rate of 40% on the value of all assets you leave behind on death over and above the first £312,000 (the current nil-rate band).
This allowance rises to £325,000 in 2009/2010, and to £350,000 in 2010/2011
The calculation of inheritance tax liability is very straightforward. Value all your assets at the date of death, take off the allowance (currently the £312,000 figure, (the nil-rate band)), and tax what is left at 40%. Simple (and potentially expensive).
Inheritance tax and annuities
In most cases, when a person dies, the right to receive payments under a pension or retirement annuity or under a purchased life annuity, ceases on the death. In some cases, however, the annuity may be guaranteed for a fixed period and the person dies before the end of that fixed period. The payments may then continue to be paid to the estate until the fixed period comes to an end. The value of that right to receive the remainder of the payments should be included as an asset of the estate.
