Inheritance Tax Rates

Inheritance Tax may be payable when an individual’s estate is worth more than the nil band rate when they die.

The Inheritance Tax threshold available on death may be increased for surviving spouses as there may have been a nil rate band not used, or fully used, on the previous death.

There are reliefs for some assets which reduce their value for Inheritance Tax purposes.

Inheritance Tax may also be payable on gifts made in an individual’s lifetime but within seven years of death.

Some lifetime gifts are exempt.

Transfers of assets into trust made in an individual’s lifetime may be subject to an immediate charge but at lifetime rates.

There also charges on some trusts.

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Transfers on or within 7 years before death 2018/2019 2017/2018
 Nil rate band to  £325,000  £325,000
 Rate of tax on balance  40%  40%
 Chargeable lifetime transfers  20%  20%
 10% or more of net estate left to charity  36%  36%
Main exemptions
Spouse/civil partner – both UK domiciled (or transferor non domiciled): unlimited
Non domiciled spouse/civil partner – UK domiciled transferor: £55,000
Business property relief of 100% for all shareholdings in qualifying unquoted companies.
Similar relief for qualifying assets used in unincorporated businesses and working farms.
Annual exemption for chargeable lifetime transfers £3,000.
Small gifts – annual amount per donee £250.
Marriage gifts by
– parent: £5,000
– grandparent: £2,500
– other: £1,000
Charities and political parties: unlimited
Regular gifts out of surplus income are also exempt.
Reduced tax charge on transfers within 7 years of death
Years before death % of death rates
 0 – 3  100%
 3 – 4  80%
 4 – 5  60%
 5 – 6  40%
 6 – 7  20%
 Over 7  Nil
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