I’m sure you’ll agree that there are few pleasures in life as rewarding as paying tax.

Even after you have left the party for good, tax will continue to be paid on the wealth you leave behind.

Sadly, Inheritance Tax, endearingly referred to as IHT, deprives you of this final opportunity to pay tax. But it’s not all bad news. Those you leave your estate to will pay this tax – perhaps that will cheer them up!

But don’t feel too left out, as you will have had a lifetime's pleasure of paying various other taxes!

If you are worried about the effect Inheritance Tax could have on those you leave behind, read on.

Firstly, let’s start with the basics.

When you die, your estate (your assets less liabilities and costs) is shared as per your will. If you do not have a valid will, your estate is divided up by the rules of "intestate". (Please note that under these, "common law spouses" get nothing).

The nil rate band (£263,000 for 2004/2005) is deducted from this, and the balance is taxed at a whopping 40%.

But that’s not all folks.

If a lifetime gift is made, not covered by the annual limits shown below, then this becomes a potentially exempt transfer (PET). If the donor survives seven years, then it becomes an exempt transfer. PETs are assumed to be exempt at the time of transfer so that no IHT is payable at that point. If the donor dies before the seven year period is up, then there is a tapering rate of IHT payable. These percentages refer to the proportion of the full rate of IHT payable on the gift, which is valued as at the date of transfer, not the date of death.

There are some gifts where if the total exceeds the nil rate band, a lifetime rate of 20% is payable. Examples of such gifts include payment into a discretionary trust or payment to a non-UK-domiciled individual.

As mentioned above, the main exemptions are:

· Transfers between spouses. An estate or part of it left to a spouse is free of IHT. (Only £55,000 is exempt if the spouse is non-UK-domiciled for IHT).

· Gifts to Charities.

· Annual Gifts. Transfers of up to £3,000 per tax year are exempt. This can be carried forward for one year only.

· Small Gifts. In addition to the above, up to £250 per tax year to any one person are exempt.

· Gifts in consideration of marriage; up to £5,000 by a parent of either marrying party, £2,500 by a grandparent or remoter ancestor, £1,000 by anybody else.

There are many IHT planning points that could really help out. These will need to be planned carefully, taking your individual circumstances into account.

If a huge tax bill is something you don’t want your loved ones being lumbered with after you depart, now may be a good time to consult professional help.

Mac Kotecha (FCA) is a Chartered Accountant and Certified Financial Planner, who deals exclusively with dentists and has been established for over 25 years. His company offers Accountancy, Taxation & Payroll services in addition to invaluable advice on practice management, buying/setting up a practice and other dental issues. Contact him on 020 8346 0391 or go to www.specialistdentalaccountants.co.uk to learn more.