Inheritance tax is hanging over more and more of us each year. This is largely due to the rise in residential property values. The current IHT allowance is £325,000 (2009/2010 £325,000). Depending on the value of your house and other assets this may not be that big an allowance. If you die leaving an estate worth more than £325,000 (2009/2010 £325,000) and you have no spouse your estate will come in for IHT at 40% on the balance.

Even if you do have a spouse to inherit then this only puts off the time when tax will be payable because he or she will also pass away one day. It is worth doing some forward planning with a tax adviser to decide whether it would be appropriate to gift some of your estate, perhaps to children or other relatives, during your lifetime; or possibly redirect assets up to the value of the nil rate band into a trust on death.

The nil rate band is effectively transferable between husband and wife such that where one spouse has died with a chargeable estate for IHT of less than the nil rate band at the time, the unused proportion will be added to the nil rate band of the surviving spouse on the second death.

One thing is for sure with all forms of tax; if you do nothing the government will use its considerable powers to make sure a share of your hard earned wealth ends up in their coffers.

Levels, and bases of, and reliefs from taxation are subject to change.

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