Glossary
UK inheritance & finance glossary
Short, plain-English definitions of the UK inheritance, tax and personal-finance terms used across this site. Each definition is UK-specific and reviewed against current HMRC and FCA guidance.
Terms in this glossary
Inheritance Tax (IHT)
- Inheritance Tax is a UK tax on the estate of someone who has died — including property, money and possessions. It is normally paid by the estate before assets are distributed, not by beneficiaries personally. The standard rate is 40% on the value of the estate above the available tax-free thresholds.
Nil Rate Band (NRB)
- The Nil Rate Band is the standard tax-free threshold for UK Inheritance Tax, currently £325,000 per person. Estates valued below this threshold pay no Inheritance Tax. Any unused portion can usually be transferred to a surviving spouse or civil partner, effectively combining allowances on the second death.
Residence Nil Rate Band (RNRB)
- The Residence Nil Rate Band is an additional UK Inheritance Tax allowance — currently up to £175,000 per person — when a main home is left to direct descendants such as children or grandchildren. Combined with the standard Nil Rate Band, a couple can typically pass on up to £1 million tax-free.
Potentially Exempt Transfer (PET)
- A Potentially Exempt Transfer is a lifetime gift of money or assets to another individual that becomes fully exempt from UK Inheritance Tax if the donor survives seven years from the date of the gift. If they die within seven years, the gift may be added back to the estate and taxed.
ISA (Individual Savings Account)
- An ISA is a UK tax-efficient wrapper for cash savings or investments. Interest, dividends and capital gains earned inside an ISA are free from UK Income Tax and Capital Gains Tax. Adults can contribute up to £20,000 per tax year across all ISA types, including Cash ISAs and Stocks & Shares ISAs.
FSCS (Financial Services Compensation Scheme)
- The FSCS is the UK's statutory deposit-protection scheme. It protects eligible deposits up to £85,000 per person, per authorised UK bank or building society, if the institution fails. Joint accounts are protected up to £170,000. Cover applies per banking licence, not per branded account.
Capital Gains Tax (CGT)
- Capital Gains Tax is a UK tax on the profit made when you sell or dispose of an asset that has increased in value, such as shares or a second property. Each individual has an annual tax-free allowance, with rates depending on the asset type and your overall Income Tax band.
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