The Inheritance Tax (IHT) Allowance is the amount of wealth that you can receive, tax-free, from someone who passed away.

In the 2020/2021 tax year, it’s £325,000.

Sometimes the IHT Allowance can increase:

• if your parent or grandparent is leaving you their main home, the IHT Allowance increases to £500,000
• the first parent to pass away can also leave their estate to the other parent, in which case they add up, and your IHT Allowance can be as high as £1,000,000.

If the estate’s value is below the IHT Allowance, you’ll still need to report it to HMRC, even if you don’t need to pay any Inheritance Tax.

Also, if your spouse or civil partner leaves everything to you, it’s all tax-free: any gifts between spouses and civil partners are tax-free.