Inheritance Tax (IHT)
| Rates and thresholds from | 2017/18 | 2016/17 |
|---|---|---|
| Nil Rate Band (NRB) | £325,000 | £325,000 |
| Residential enhancement (RNRB) | 100,000 | N/A |
| 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% |
Notes
- 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 effective rate is 25%.
- IHT on chargeable lifetime transfers to trusts is payable within 6 months from the end of the month of transfer
Lifetime gifts
| 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% |
Note
Lifetime gifts between individuals (‘potentially exempt transfers’) are only charged to IHT if the donor dies within seven years of the gift.
Exempt gifts
| 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 (see note) |
| £2,500 | From a grandparent (or remoter ancestor) of a party to a marriage, or from one party of a marriage to the other (see note) |
| £1,000 | From any other person to a party to a marriage (see note) |
Note
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 |
Note
In all cases the property must have been owned for at least two years, and other conditions apply.
