An introduction to inheritance tax (IHT)

Produced by a Tolley Trusts and Inheritance Tax expert

Trusts and Inheritance Tax

Guidance

This guidance note provides a background to IHT and the basic principles.

Background to inheritance tax

Inheritance tax is, essentially, a tax on gifts. This typically arises when a person dies and all the property that they own (their ‘estate’) passes to beneficiaries. An individual may also transfer their assets to others during lifetime. This could be an outright gift of assets to another person or a gift into trust.

Assets in trust are held by trustees for the benefit of others, whose entitlement to them is restricted in some way. Special inheritance tax rules apply to trusts to reflect the separation of legal and beneficial ownership.

IHT is a tax on the donor ― the person who is transferring the asset(s). It is calculated with reference to their estate. It is not a tax on the beneficiaries, though what the beneficiaries receive may be reduced by the amount of tax. This position contrasts with the law

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