IHT Glossary

A – D

Accumulation trust — A trust where trustees have the power to accumulate income rather than distributing it. Accumulated income becomes part of the trust capital. Treated as relevant property for IHT.

Administrator — The person appointed to manage the estate of someone who died without a will (intestate). Equivalent to an executor for testate estates. Also called a personal representative.

Agricultural Property Relief (APR) — A relief that reduces the IHT value of qualifying agricultural property by 50% or 100%. From 6 April 2026, the 100% rate is capped at £2.5 million per estate (combined with BPR). See Agricultural Property Relief.

Annual exemption — Each person can give away £3,000 per tax year free of IHT. One unused year can be carried forward. See Annual Exemption (£3,000).

Bare trust — A trust where the beneficiary has an absolute right to the capital and income. Transparent for IHT — assets are treated as belonging to the beneficiary. See Trusts and Inheritance Tax.

Baseline amount — The figure used to calculate whether 10% has been left to charity for the 36% reduced rate. Broadly: the net estate minus the NRB, RNRB, and other exemptions.

Beneficiary — A person or organisation entitled to receive assets from an estate or trust.

Business Property Relief (BPR) — A relief that reduces the IHT value of qualifying business assets by 50% or 100%. From 6 April 2026, the 100% rate is capped at £2.5 million per estate (combined with APR). See Business Property Relief.

Chargeable lifetime transfer (CLT) — A gift made during lifetime that is immediately chargeable to IHT (typically a gift into a discretionary trust). Charged at 20% on any excess above the NRB. See Chargeable Lifetime Transfers.

Deed of variation — A legal document that redirects part or all of a beneficiary’s inheritance to someone else. If made within 2 years of death, it is treated as if the deceased had made the new arrangement in their will.

Direct descendants — Children, grandchildren, great-grandchildren (including step-children and adopted children). Relevant for the residence nil-rate band, which only applies when a home passes to direct descendants.

Direct Payment Scheme — A scheme allowing executors to arrange for banks to transfer funds from the deceased’s accounts directly to HMRC to pay IHT before probate is granted.

Discretionary trust — A trust where trustees have discretion over who benefits and when. The most common type of relevant property trust. Subject to entry, 10-year, and exit charges.

Domicile — The country a person considers their permanent home. Determines whether worldwide assets (UK domicile) or only UK assets (non-UK domicile) are subject to IHT.

E – I

Estate — Everything a person owned at death, plus certain trust interests and lifetime gifts, less debts and liabilities. The taxable estate is what remains after exemptions and reliefs.

Excepted estate — An estate that qualifies for simplified IHT reporting — no IHT400 form is needed. See Excepted Estates.

Executor — The person named in a will to administer the estate. Also called a personal representative (PR).

Exit charge — An IHT charge on capital leaving a relevant property trust. Proportionate to the last (or notional first) 10-year charge. See Exit Charges on Trusts.

Exempt transfer — A transfer that is completely free of IHT. Examples: spouse transfers, gifts to charity, annual exemption gifts.

Gift with reservation of benefit (GROB) — A gift where the donor continues to benefit from the asset. The asset remains in the donor’s estate for IHT as if the gift had not been made.

Grant of probate — The court document authorising executors to deal with the deceased’s estate. See Probate and IHT Overview.

Grossing up — When the donor pays the IHT on a CLT (rather than the trustees), the tax itself is treated as an additional gift. The CLT must be “grossed up” to include the tax, making the effective rate 25%.

IHT400 — The full Inheritance Tax account submitted to HMRC for non-excepted estates. See The IHT400 Form.

IHT402 — The supplementary schedule for claiming the transferable nil-rate band from a predeceased spouse.

Immediate post-death interest (IPDI) — An interest in possession trust arising on death (in the deceased’s will). Not treated as relevant property — the trust assets form part of the life tenant’s estate.

Interest in possession (IIP) — A trust where a beneficiary has a right to the income. The IHT treatment depends on when the trust was created (before or after 22 March 2006).

Intestacy — Dying without a valid will. The estate is distributed according to the intestacy rules, which may not be tax-efficient.

L – P

Letters of administration — The court document authorising administrators to deal with an intestate estate. Equivalent to a grant of probate for estates with a will.

Life tenant — The beneficiary of an interest in possession trust who has the right to income from the trust during their lifetime.

Nil-rate band (NRB) — The IHT-free threshold — £325,000 per person for 2026/27, frozen until at least April 2028. See The Nil-Rate Band.

Normal expenditure out of income — An exemption for regular gifts made from surplus income that do not affect the donor’s standard of living. Potentially unlimited. See Gifts from Normal Expenditure.

Personal representative (PR) — The person responsible for administering the estate. Can be an executor (if named in a will) or an administrator (if intestate).

Periodic charge — Another name for the 10-year anniversary charge on relevant property trusts. Maximum effective rate of 6%. See 10-Year Anniversary Charges.

Potentially exempt transfer (PET) — A gift to an individual (not into a trust) that is exempt from IHT if the donor survives 7 years. If the donor dies within 7 years, IHT is charged at up to 40%. See Potentially Exempt Transfers.

Pre-owned assets tax (POAT) — An income tax charge on the benefit of using an asset you have previously given away. An anti-avoidance measure that complements the gift with reservation rules.

Probate — The legal process of proving a will is valid and obtaining authority to deal with the estate. See Probate and IHT Overview.

R – Z

Relevant property trust — A trust subject to the IHT periodic and exit charge regime. Includes discretionary trusts and most post-March 2006 interest in possession trusts.

Remainderman — The person entitled to the capital of a trust after the life tenant’s interest ends (usually on the life tenant’s death).

Residence nil-rate band (RNRB) — An additional IHT-free allowance of £175,000 when a qualifying home passes to direct descendants. See The Residence Nil-Rate Band.

Settled property — Property held in trust. The IHT treatment depends on the type of trust and when it was created.

Settlor — The person who creates a trust by transferring assets to it.

Seven-year rule — Gifts made more than 7 years before death are exempt from IHT. Gifts within 7 years may be taxed, with taper relief applying between years 3 and 7. See The 7-Year Rule.

Small gifts exemption — Gifts of up to £250 per recipient per tax year are exempt. See Small Gifts & Other Exemptions.

Spouse exemption — Transfers between spouses or civil partners are exempt from IHT (unlimited amount, provided both are UK-domiciled). See Spouse & Civil Partner Exemption.

Taper relief — A reduction in IHT on gifts made between 3 and 7 years before death. Reduces the tax (not the gift value) by 20% for each year beyond 3. See Taper Relief.

Transferable nil-rate band (TNRB) — The unused percentage of a predeceased spouse’s NRB that can be claimed by the surviving spouse’s estate. See Transferable Nil-Rate Band.

Trustee — The person or body responsible for holding and managing trust assets for the benefit of the beneficiaries.

Woodland relief — A relief that allows the IHT on the value of growing timber to be deferred until the timber is sold. See Woodland Relief.

Further Reading

• What Is Inheritance Tax? — start here for a complete overview
• IHT Rates & Thresholds History — historical rates and NRB amounts
• Key IHT Dates — important deadlines for executors
• IHT Planning Basics — strategies to reduce your IHT liability