Inheritance Tax is usually paid on someone's estate (that is, the total value of their property and other assets) when they die. It is also sometimes payable on valuable gifts made during the person's lifetime, or on trusts that they set up. Inheritance tax is not charged on every estate, only those valued at £325,000 or above as the law stands in the 2009-2010 tax year. So who pays the Inheritance Tax? When someone dies, their personal representative or the executor of their Will is responsible for making the tax payment out of the funds left in the estate. More info
There are some exceptions to the Inheritance Tax threshold. If you are leaving your estate to a spouse or civil partner who lives permanently in the UK, you do not usually have to pay Inheritance Tax at all. This also counts for gifts that you make to them during your lifetime, even when they amount to more than the £325,000 threshold. Those in a marriage or a civil partnership can actually transfer their unused allowance to their living partner when they die, meaning that the inheritance tax allowance can be as much as £650,000. Any gifts that you make to a registered UK charity are exempt from Inheritance Tax, and you can give small gifts each year (valued at up to £3,000 in total) without incurring any costs. Less