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
|Gifts made up to seven years before|
death (see lifetime gifts)
|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 effective rate is 25%.
- 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
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 (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)|
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.