Inheritance Tax (IHT)
Rates and thresholds 2018/19 2017/18 Nil Rate Band (NRB) £325,000 £325,000 Residential enhancement (RNRB) 125,000 100,000 Tax paid on legacies on death 40% 40% Tax paid if at least 10% of net estate
is left to charity on death
36% 36% Gifts made up to seven years before
death (see lifetime gifts)
40% 40% Chargeable lifetime transfers to trusts 20% 20%
- RNRB is available for transfers of a main residence (or assets of an equivalent value if the main residence has been sold) to direct descendents. It tapers away at the rate of £1 for every £2 of estate value above £2m
- Up to 100% of the proportion of a deceased spouse’s/civil partner’s unused NRB and RNRB may be claimed to increment the current NRB and RNRB when the survivor dies.
- Gifts or legacies to charities are not charged to IHT.
- IHT due on a deceased’s estate and on gifts within seven years of death is generally due six months after the month of death, but in practice it must be paid before probate is granted.
- If the donor pays the IHT due on a chargeable lifetime transfer to a trust, the rate is 25% rather than 20%.
- IHT on chargeable lifetime transfers to trusts is payable within 6 months from the end of the month of transfer
Reduced tax charge on gifts up to seven years before death Years before death 0-3 3-4 4-5 5-6 6-7 Percentage of IHT
death charge payable
100% 80% 60% 40% 20%
Lifetime gifts between individuals (‘potentially exempt transfers’) are only charged to IHT if the donor dies within seven years of the gift.
Amount of relief Conditions £3,000 pa Amount per donor; unused exemption can can be carried forward one year £250 pa De minimis amount per recipient Unlimited Regular gifts out of surplus income Unlimited To UK domiciled spouse or civil partner £325,000 To non-domiciled spouse/civil partner £5,000 From parent of party to marriage £2,500 From a grandparent (or remoter ancestor) of a party to a marriage, or from one party of a marriage to the other £1,000 From any other person to a party to a marriage
Exemptions for gifts on marriage apply also to civil partnerships.
Business and agricultural property
Amount of relief Property and conditions 100% All shareholdings in unquoted trading companies; an unincorporated business or interest in such a business 50% Controlling shareholding in quoted company; land and buildings used by either a trading company controlled by the owner, or a partnership where he is a partner 100% Agricultural value of qualifying farmland and buildings
In all cases the property must have been owned for at least two years, and other conditions apply.