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