Figuring out the size of your estate is the first step.

It can be surprising what is included in your estate for inheritance tax purposes and what’s not. For example, did you know that any gifts to your loved ones you’ve made in the last seven years could be included, but the value of your pension might not be?

So, to start you should add up the value of your property, savings, investments and other assets e.g. cars. Also, if you’re entitled to income from a trust or live in a property held in trust, the value of the trust fund may need to be added too.

Then, imagine you turned your house upside down. Anything that falls out should be included. So, your TVs, laptops, furniture, antiques, jewellery, any valuable collections. You can see how quickly it would all add up. But does that mean inheritance tax would apply to all of it?

There are allowances that you need to be aware of. The good news is you won’t pay inheritance tax on the full value of your estate. There are tax-free allowances before inheritance tax applies. The first tax-free allowance to be aware of is £325,000. You may have heard it being called the nil-rate band, but let’s call it a tax-free allowance just now to keep things simple. This means you’ll only be liable for tax on the value of your estate over the £325,000 allowance.

There’s another big allowance, but it has some rules it. The tax-free property allowance of £175,000 – or residence nil-rate band to give it its technical name – applies if you leave your home to your children or grandchildren.
So, if you add the two allowances together (£325,000 and £175,000), you can potentially leave £500,000 tax-free, as long as you leave your home to your children or grandchildren.

You can double your allowances to leave even more tax-free. Did you know if you’re married or in a civil partnership
you can leave everything to your partner completely free from inheritance tax? However, this doesn’t mean you
can ignore inheritance tax.

For example, if you die first, everything would pass to your partner tax-free. But when they die, there could be
inheritance tax due. The good news is your partner can use your unused allowances. So, if you leave everything to them they can use your tax-free allowances of up to £500,000 plus their own £500,000. This means they can potentially leave £1 million tax-free.