You are thinking of the tax position on someones death

The position at death is similar to the situation considered above. If the value of the estate at death, plus the value of gifts made by that individual in the 7 years prior to death, is less than the inheritance tax threshold (£325,000 from April 2009 to 5 April 2015), then there will be no inheritance tax payable on the estate at death.

If the value of the estate at death is close to the inheritance tax threshold, or if the case is complex, you will probably need to take advice, but you may like to look at the ‘mainly for advisers‘ pages first. There are reliefs and exemptions which may be available to keep the value of the estate below the inheritance tax threshold or to reduce the tax payable.

Couples

There is one further point to consider for an estate at death. That is the position of couples. By couples, we mean married couples or registered civil partners – that is people living in a legally recognised relationship. With couples, special rules have applied since 9 October 2007. Under these special rules, any percentage of the inheritance tax threshold unused on the death of the first member of the couple, is available on the death of the second member of the couple.

In straightforward cases, where none of the inheritance tax threshold was used on the first death, there is double the inheritance tax threshold available on the second death.

Example

Janet and John are a married couple. In 1992, Janet dies. She leaves her entire estate to John. Her estate was valued at £100,000 at her death.

In May 2011, John dies. He leaves his estate to his brother Frederick. John’s estate is valued at £450,000 at his death. This is more than the inheritance tax threshold of £325,000.

But as none of the inheritance tax threshold (or ‘inheritance tax nil rate band’) was used at Janet’s death, 100% of the inheritance tax threshold at current rates is available at John’s death – in addition to his own inheritance tax threshold. Therefore £650,000 is the inheritance tax threshold available on John’s death. So no inheritance tax is payable on John’s death.

There is detailed guidance on what evidence is required to make a claim the relief on the HMRC website at: http://www.hmrc.gov.uk/inheritancetax/intro/transfer-threshold.htm