vap
chartered certified accountants
CLIENTS page
CLIENTS page
INHERITANCE TAX - rates and allowance |
2024/25 |
2023/24 |
Notes |
Nil Rate Band (NRB) - single person |
£325,000 |
£325,000 |
Unused NRB and RNRB on the death of a spouse or civil partner is available to the surviving spouse/civil partner. In 2022/23, the maximum could be £650K NRB+£350K RNRB = £1m on a second spouse’s death.The RNRB is available if main residence is given to own, adopted or foster children and is reduced by £1 for every £2 of an estate above £2m. |
NRB - married couples/civil partnership |
£650,000 |
£650,000 | |
RNRB - residence nil rate band (home allowance) |
£175,000 |
£175,000 | |
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 - lifetime gifts |
2024/25 |
2023/24 |
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 |
|
Gifts made within 7 years before death (YBD) will be added to an estate on death on a tapered basis - see table across. |
INHERITANCE TAX - death exemptions/reliefs |
2024/25 |
2023/24 |
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.
YBD |
0-3 |
3-4 |
4-5 |
5-6 |
6-7 |
% |
100 |
80 |
60 |
40 |
20 |