From this week, people can pass on an extra £25,000 to their loved ones free of inheritance tax.

The inheritance tax allowance – called the nil-rate band – remains frozen at £325,000 per person in 2018/19. Above that sum, tax is charged at 40%.

But if your estate includes your home, you are entitled to an additional allowance, which has increased from £100,000 per person to £125,000 in the new tax year, which officially started on Friday.

The nil-rate was introduced in April last year, and gave each person an additional £100,000 to pass on tax-free, taking into account the surge in property values over the years.

This allowance is due to rise by £25,000 every year until 2020/21, when it reaches £175,000. From this week, it is £125,000.

Added to the regular inheritance tax allowance, it means individuals can pass on £450,000 this tax year and, in two years’ time, they’ll be able to give their families £500,000.

The rules state that for the additional allowance to apply, your property must be passed on to “direct descendants”.

These include: children and their spouses or civil partners, grandkids, great-grandchildren, stepchildren, adopted children, foster kids, and children under guardianship.

The complex rules around inheritance tax on gifts are also being reviewed, which could soon enable you to give more to your family tax-free.