What is the UK inheritance tax rate for 2024/25?

The UK inheritance tax rate is 40% on estates above the nil-rate band of £325,000. The rate reduces to 36% if 10% or more of the estate is left to charity.

What is the residence nil-rate band?

The residence nil-rate band is an additional £175,000 allowance available when you leave your main residence to direct descendants (children or grandchildren).

Who pays inheritance tax?

Inheritance tax is typically paid by the executors of the estate from the estate's assets before distribution to beneficiaries. Payment is usually due within 6 months of death.

How Trust Accounts Work in the UK

A trust account holds and manages assets on behalf of one or more beneficiaries, according to the terms set out in a trust deed. Trustees have a legal duty to manage the assets in the best interests of the beneficiaries.

How Trust Accounts Work

Trustees open a dedicated bank or investment account in the name of the trust
All trust assets, income, and gains are held within the account, separate from personal assets
Trustees invest and manage the trust fund according to the trust deed and trustee duties
Income may be distributed to income beneficiaries or accumulated within the trust
Capital is paid out when the trust ends or at the trustees' discretion (discretionary trusts)

Tax Rules for Trust Accounts

Income tax: trusts pay income tax at the trust rate (45% on income above a £1,000 standard rate band)
Capital gains tax: trusts benefit from an annual CGT exemption (half the personal allowance)
IHT entry charges: 20% on amounts above the nil rate band at creation
IHT periodic charges: up to 6% every 10 years on discretionary trust assets