Inheritance tax may be payable when an individual’s estate is worth more than the IHT nil rate band when they die. Lifetime and death transfer between UK and domiciled spouses are exempt from IHT.
The inheritance tax threshold available on death may be increased for surviving spouses as there may have been a nil rate band not used, or not fully used, on the previous death.
Inheritance tax may also be payable on gifts made in an individual’s lifetime but within seven years of death. Transfer of assets into trust made in individual’s lifetime may be subject to an immediate charge but at lifetime rates. There may also be some charges on some trusts.
There are reliefs for some business and farming assets which reduce their value for inheritance tax purposes.
Threshold
Standard nil rate band : £325,000
Rates
| Rate | % |
|---|---|
| Lifetime rate | 20% |
| Death rate | 40% |
| Death rate if sufficient charitable legacies made | 36% |
Relief for lifetime gifts
Annual exemption : £3,000
Small gifts : £250
Marriage : the amount of relief depends on who the gift is from.
| Gift from | Amount |
|---|---|
| Parent | £5,000 |
| Grandparent | £2,500 |
| Bride/Groom | £2,500 |
| Other | £1,000 |
Reduced charge on figts within seven years of death
| Years before death | % of death charge |
|---|---|
| 0-3 | 100 |
| 3-4 | 80 |
| 4-5 | 60 |
| 5-6 | 40 |
| 6-7 | 20 |