Quilter 5 Katherine is divorced with four children. She owns a house valued at £450,000 plus investments worth £600,000. She has not taken steps to reduce her IHT liability. Estate – nil-rate band at death (ie £1,050,000 - £500,000 * ) = £550,000 Taxable estate x IHT death rate = IHT payable (£550,000 x 40% = £220,000) The four children would share the balance of the estate (£1,050,000 - £220,000 = £830,000), leaving each child with just £207,500. In this case, HMRC is the biggest individual beneficiary, receiving £220,000. Example Why it’s important If you do nothing,what will happen? If you do nothing to mitigate your IHT bill, your beneficiaries could be faced with 40% tax on all your assets over the available nil-rate band and residence nil-rate band. This means that HMRC could become the largest beneficiary of your estate, as the following example shows. *Includes the £175,000 residence nil rate band for the 2020/21 tax year. Please note that this example is entirely fictional and used for illustration purposes only.