Question 1

How do inheritance tax thresholds work?

Accepted Answer

**Inheritance tax (IHT)** in the UK is charged on the value of an estate above a threshold when someone dies. The structure involves several allowances that interact, which is why the commonly quoted figures vary.

**The nil-rate band.** Each individual has an allowance below which no IHT is due — **£325,000**, frozen for an extended period. Above it, the standard rate is **40%**.

**The residence nil-rate band.** An additional allowance — up to **£175,000** — applying where a **main residence is left to direct descendants**: children, stepchildren, adopted children, grandchildren. It does not apply if property passes to siblings, nieces, nephews or friends.

It **tapers away** for estates above £2 million, reducing by £1 for every £2 over, so larger estates lose it entirely.

**Transferable allowances — the point that changes everything.** Anything unused on the first death **transfers to the surviving spouse or civil partner**. Since transfers between spouses are themselves exempt, the first death typically uses no allowance at all.

The practical result: a married couple leaving a home to children can often pass up to **£1 million** before IHT applies, combining two nil-rate bands and two residence bands.

**Key exemptions:**

**Spouse or civil partner** — completely exempt.

**Charities** — exempt, and leaving 10% or more of the net estate reduces the rate on the remainder to **36%**.

**Annual gifting allowance** of £3,000, small gifts, wedding gifts, and **regular gifts out of surplus income**, which is generous and underused.

**The seven-year rule.** Most gifts become exempt if you survive **seven years**. Between three and seven years, **taper relief** reduces the tax on the gift — note it reduces the tax, not the value of the gift itself, which is widely misunderstood.

**Business and agricultural property reliefs** exist and have been subject to reform.

**Rules change frequently.** Take professional advice.

Question 2

What is capital gains tax, and when does it apply?

Accepted Answer

Capital gains tax (CGT) is tax on the profit made when you dispose of an asset that has risen in value — not on the amount you receive, and not on the asset itself. The core idea. Gain equals

Question 3

What is a tax code, and why might mine be wrong?

Accepted Answer

A tax code tells your employer or pension provider how much tax-free income to give you before deducting tax. It is issued by HMRC, applied by your employer, and it is wrong more often than people

Question 4

What happens to bank accounts and finances when someone dies?

Accepted Answer

Accounts are frozen, the estate is gathered and debts paid, and only then is anything distributed — a sequence that takes months and creates real practical difficulty for the people left behind. What

Question 5

Who actually has to file a self assessment tax return?

Accepted Answer

Anyone whose income is not fully taxed at source or whose circumstances fall into defined categories — and the obligation is yours to identify, which is the part that catches people out. Nobody

Question 6

What is an ISA and how do the allowances work?

Accepted Answer

An Individual Savings Account is a UK tax wrapper. Money inside it grows free of income tax and capital gains tax, and withdrawals are tax-free. It is not an investment itself — it is a container

Question 7

What does National Insurance actually pay for?

Accepted Answer

National Insurance (NI) is a UK contribution paid by employees, employers and the self-employed. It funds specific contributory benefits and the NHS — and the relationship between what you pay and

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