On death, a person's estate is liable to Inheritance Tax (IHT) at 40% to the extent, if any, that its value exceeds the current threshold of £325,000. This threshold is referred to below as the IHT-free amount. Assets which pass between spouses are free of IHT and so will not use up any of the IHT-free amount. If after a person’s death any of this IHT-free amount is unused (perhaps because the majority of the deceased’s estate passed to the surviving spouse), the unused part is transferable to the surviving spouse, who may make use of it on their death. This means that many surviving spouses will have a combined allowance of £650,000 available on their death.
