It has been described as Britain's most hated tax and almost uniquely unpopular. Quite a reputation. But what is it and is it likely to affect you?

Inheritance tax is a tax charged on the estate (broadly the assets less debts less the nil rate band) of an individual who has passed away. At 40% the amounts of tax can be substantial.

It would be easy to assume that it will only affect very wealthy and well off individuals, but this could be a potentially expensive assumption to make.

With the continued rise in house prices many more individuals will be within the scope of inheritance tax (IHT) and the bulk of the estate's value will be tied up in a house.

With IHT charged at 40% and proving so unpopular individuals will likely want to take steps to reduce their estates IHT bill.

Once people know you're an accountant the topic of IHT and potential planning points seems to keep coming up in conversation. Through these conversations it became clear that typical ideas to reduce IHT bills would not be effective and in most cases are caught by specific rules. But with an awareness of what allowances are available and how to use them just a little planning can be very effective.  

I will run a series of short blogs on this topic, each covering an available allowances and the final blog common pitfalls.

They will focus on planning within lifetime but will not cover planning points involving trusts.

We will follow Stan as he considers his options.

He earns £30,000 per year, which covers his routine expenses so he never dips into his savings. He inherited a house and some cash 15 years ago. The house is now valued at £750,000 and is mortgage free. His other assets are:

Car - £10,000

Home contents - £5,000

Cash at bank - £500,000

His current plan is to gift the house to his sister and the remaining estate to his only daughter from a previous marriage. There is no real reasoning to this division other than Stan though it would be simple and clear to follow for those administering his estate. What would his estimated IHT bill be based on this?

Total estate - £1,265,000

Less Nil rate band £325,000

£940,000

IHT at 40% £376,000

An eye watering sum especially for his daughter who would be left with only £139,000 from the £515,000 (estate value apart from the house).

Is there any way for Stan to reduce this figure? And if so, by how much? Stick with him through this series to find out how much he can save. Each new instalment will be released on Monday morning.