The nil rate band for cumulative chargeable transfers in the last seven years is £312,000 for gifts from 6 April 2008 onwards. If one of the married couple/civil partnership did not use the full band on death, for deaths on or after 9 October 2007 the unused proportion increases the nail band of the other spouse/partner.
Gifts above that are charged at the following rates:
Chargeable legacies on death
40%
Gifts within 7 years of death
40%, with reductions if over 3 years before death.
Lifetime chargeable gifts
20% if the donee pays the tax
25% if the doner pays.
Payment
Inheritance Tax (IHT) on a deceased’s estate and on gifts within 7 years of death is generally payable at the end of six months after the month of death, but it must be paid before probate is granted, and this may necessitate earlier settlement.
IHT on chargeable life time gifts is payable on the later of 6 months after the month of transfer or 30 April in the next tax year.
Major reliefs
The following transfers are exempt from IHT:
The first £3,000 gifted in a tax year ( unused limit may be carried forward for one year)
Small gifts of up to £250 to 1person in a year.
Normal expenditure out of income
Gifts between husband and wife, unless the donor is domiciled in the UK and recipient is not.
Gifts between individuals more than 7 years before the donor’s death (until the donor dies such gifts are left out of account of “potentially exempt”)
Gifts in consideration of marriage - £5,000 from a parent, £2,500 from a grand parent or a party to the marriage, £1,000 from others –
Most business and agricultural property enjoys a 100% relief once it has been owned for two years although some types of property are relieved only at 50%, and it is important to meet all conditions.
Pre-owned assets tax
From 6 April 2005, an income tax charge applies to certain arrangements which remove assets from an IHT – chargeable estate but allow the former owner to use or enjoy them.
