We have listed below a number of features of Inheritance Tax (IHT) that readers may find useful:
- IHT is payable at 40% on death and 20% on lifetime gifts.
- There is a nil rate band, currently £325,000, below which no IHT is payable.
- A reduced rate of IHT at 36% applies to estates from 6 April 2012, where 10% or more of a net estate is left to charity.
- Any unused nil rate band can be transferred to a surviving spouse or civil partner.
- There are a number of lifetime transfers or gifts that are not subject to IHT. (*See list below).
- Any gifts to a UK charity during a donor’s lifetime or in their will are exempt from IHT.
- Business Relief of 50% or 100% can be claimed on certain business property or assets such as unlisted shares and machinery.
- Agricultural property relief, 50% or 100%, can be claimed on farming land, farmhouses, farm worker homes and barns.
- Woodland timber qualifies for a special relief from IHT. The value of the timber qualifies not the land.
- Certain gifts of national heritage property and important works of art may qualify for relief from IHT.
- Any gift made by a donor out of his surplus income is generally exempt from IHT.
*Additionally, an individual can make the following gifts exempt from IHT:
- Annual gifts out of capital (with one year carry forward if unused) – £3,000
- Small gifts (per recipient) – £250
- Parental gift on marriage – £5,000
- Grandparent or party to marriage – £2,500
- Other gifts on marriage (per donor) – £1,000
If you have any queries regarding Inheritance Tax or estate planning issues please do give me a call.
Sue Stephens, Personal Tax Consultant