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INHERITANCE TAX - rates and allowance

2018/19

2017/18

Notes

Nil Rate Band (NRB) - single person

£325,000

£325,000

IHT is mainly charged at 40% on the value of an Estate on death that is in excess of the total of NRB+RNRB. Unused NRB and RNRB on the death of a spouse or civil partner is available to the surviving spouse/civil partner. In 2018/19 the maximum could be £650K NRB + £250K RNRB = £900K on second spouse’s death.

NRB - married couples/civil partnership

£650,000

£650,000

RNRB - residence nil rate band (home allowance)

£125,000

£100,000

Tax rate above NRB + RNRB

40%

40%

Tax rate above NRB + RNRB - 10% left to charity

36%

36%

Tax rate on chargeable lifetime transfers

20%

20%

IHT can also arise on chargeable transfers before death (lifetime transfers).

Inheritance Tax (IHT)

INHERITANCE TAX  - lifetime gifts

2018/19

2017/18

Notes

Annual exemption - general gifts

£3,000

£3,000

Each tax year an individual can gift an exempt amount up to £3,000 to any person. If the exemption is not used, it can be carried forward for one year only.

Small gifts to the same person - annual amount

£250

£250

You can gift up to £250 to any number of people free of IHT.

Wedding gifts - one-off

by each parent

£5,000

£5,000

These gifts are free of IHT if made on the occasion of marriage. For example, the son’s parents could each gift £5,000 and the daughter’s parents £5,000 each, making £20,000 in total.

grandparent

£2,500

£2,500

any other person

£1,000

£1,000

Gifts out of income - You can make regular gifts out of income IHT free provided they are made from your post tax income

exempt

exempt

Gifts must be habitual and leave you with sufficient income to maintain your usual standard of living.


Gifts to spouse/civil partners

exempt

exempt

Gifts to spouses or civil partners are exempt from IHT in lifetime or on death.

Gifts to EX spouse/civil partners for maintenance

exempt

exempt

Gifts to spouses or civil partners for their maintenance are exempt from IHT.

Gifts to children in full-time education

Monies given to a child in full-time studies for their maintenance or for the costs of their education and training

exempt

exempt

Can be used to payoff student fees and loans free of IHT PROVIDED they are made during a tax year in which the student was in education.

Gifts to dependant relative

exempt

exempt

Gifts to a relative who is financially dependent on you are exempt from IHT.

Potentially exempt transfers (PETs)

If Donor survives 7 years after making a gift which is not chargeable in lifetime then it is fully exempt

potentially

exempt

potentially

exempt

Gifts made within 3-7 years of death will form part of an estate on death on a tapered basis.

INHERITANCE TAX - death exemptions/reliefs

2018/19

2017/18

Notes

Business Property Relief (BPR)

100%

100%

BPR also extends to unquoted shares, agricultural land and shares quoted on AIM. Asset must be held for at least 2 years.

Agricultural Property Relief (APR)

Woodlands Relief

100%/50%

100%/50%

This covers land and property used for agricultural purposes. Woodlands Relief applies to timber value only.

Charitable bequests - to charities, political parties, etc.

exempt

exempt

Also exempt if made during lifetime

Quick Succession Relief

20%-100%

20%-100%

Relief from IHT is available if someone inherits an asset and dies within 5 years.

Fall in value of assets - since death

lower value

lower value

If property falls in value within 4 years of death (12 months for shares) a lower value may be claimed and relief obtained.

IHT is payable on a person’s Estate on death or during lifetime if they exceed certain thresholds. It is sensible tax planning to gift assets away during your lifetime to take advantage of various reliefs, and to reduce IHT, so that more is left to your descendants.