Inheritance Tax Glossary

Agricultural Property Relief (APR)

Relief from inheritance tax available on agricultural property, including farmland and buildings. Can provide 50% or 100% relief depending on the property type and use.

Annual Exemption

You can give away £3,000 worth of gifts each tax year without them being added to the value of your estate. This exemption can be carried forward one year if unused.

Business Property Relief (BPR)

Relief from inheritance tax on business assets. Can provide 50% or 100% relief depending on the type of business asset. Must have owned the asset for at least 2 years.

Chargeable Transfer

A gift or transfer that is not exempt from inheritance tax. Includes gifts to most trusts and gifts above the available nil-rate band.

Deed of Variation

A legal document that allows beneficiaries to redirect their inheritance within two years of death. Can be used for tax planning purposes.

Domicile

Your permanent home country for tax purposes. UK domicile means your worldwide assets are subject to UK inheritance tax. Different from residence or nationality.

Note: Estate Map assumes UK domicile. If you are domiciled outside the UK, different rules apply and you should seek professional advice.

Estate

Everything you own at the time of death, including property, money, possessions, and investments, minus any debts and liabilities.

Executor

Person(s) named in a will to administer the estate after death. Responsible for collecting assets, paying debts and taxes, and distributing the estate to beneficiaries.

Exempt Beneficiary

Someone who can receive gifts or inheritance tax-free, including spouses, civil partners, and charities.

Gift

Transfer of value from one person to another. For IHT purposes, includes giving away money, property, or assets during your lifetime.

Gross Estate

Total value of all assets before deducting debts and liabilities.

Inheritance Tax (IHT)

Tax charged on the estate of someone who has died. Currently charged at 40% on amounts above the nil-rate band threshold of £325,000.

Life Interest Trust

A trust that gives someone the right to benefit from assets (e.g., live in a property or receive income) during their lifetime, with the assets passing to others on their death.

Net Estate

Gross estate minus debts, liabilities, and funeral expenses. This is the figure used to calculate IHT.

Nil-Rate Band (NRB)

The threshold below which no inheritance tax is charged. Currently £325,000 (frozen until 2030). Can be transferred between spouses/civil partners.

Pension Death Benefits

Payments from pension schemes on death. Currently outside the estate for IHT (changing from 2027). May be tax-free if death occurs before age 75.

Potentially Exempt Transfer (PET)

A gift that is potentially exempt from IHT if you survive 7 years after making it. Includes most gifts between individuals.

Probate

The legal process of administering a deceased person's estate. Includes proving the will is valid and getting authority to deal with the estate.

Residence Nil-Rate Band (RNRB)

Additional IHT allowance of up to £175,000 when you leave your main residence to direct descendants (children, grandchildren). Tapered for estates over £2 million.

Seven-Year Rule

Gifts are exempt from IHT if you survive 7 years after making them. Taper relief applies if death occurs between 3 and 7 years.

Small Gifts Exemption

You can give up to £250 per person per year without it counting towards your estate. Cannot be combined with the annual exemption for the same person.

Spouse/Civil Partner Exemption

Transfers between spouses or civil partners are exempt from IHT (with some exceptions for non-UK domiciled spouses).

Taper Relief

Reduces the tax charged on gifts made between 3 and 7 years before death. Reduces the tax rate, not the value of the gift.

Transferable Nil-Rate Band

Unused nil-rate band from a deceased spouse/civil partner that can be transferred to the surviving partner, potentially doubling the allowance to £650,000.

Trust

Legal arrangement where assets are held by trustees for the benefit of beneficiaries. Can be used for tax planning and asset protection.

Valuation

The process of determining the market value of assets for IHT purposes. Must be the open market value at the date of death or gift.