Biggun gave a nice description. Generally speaking on a blanking cut the space between the punch and die would be 10% of material thickness. In the case of this thread 12ga or .105” it would be .010” per side. As an example if we were to make a .500 square hole the die would be a.520 square
As a second point to put a visual on Frosty’s number of .0001. The average piece of notebook paper is.004 thick. We would need to slice the paper into 40 thinner pieces to get .0001
Even as a professional tool maker I almost never work in that kind of tolerance.