Inheritance tax (often abbreviated to IHT) is essentially a wealth tax that is charged when wealth changes hands.
It is a tax that is charged principally on death. This is because the biggest transfer of wealth usually occurs on death. Inheritance tax may be charged during a person’s lifetime, but the occasion when it is charged most often is on death.
The technical legal term for the tax is that it is a charge on a ‘transfer of value’.
This begs the question of what is a ‘transfer of value’?
A transfer of value is what happens when you dispose of something of value (e.g. money), and you are worth less than you were before you disposed of it.
A transfer of value has three ingredients: