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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
36% 36%
Gifts made up to seven years before
death (see lifetime gifts)
40% 40%
Chargeable lifetime transfers to trusts 20% 20%

Notes

  1. 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
  2. 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.
  3. Gifts or legacies to charities are not charged to IHT.
  4. 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.
  5. If the donor pays the IHT due on a chargeable lifetime transfer to a trust, the effective rate is 25%.
  6. IHT on chargeable lifetime transfers to trusts is payable within 6 months from the end of the month of transfer

Lifetime gifts

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
100% 80% 60% 40% 20%

Note

Lifetime gifts between individuals ('potentially exempt transfers') are only charged to IHT if the donor dies within seven years of the gift.

Exempt gifts

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)

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

Note

In all cases the property must have been owned for at least two years, and other conditions apply.