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Rates
The nil rate band for cumulative chargeable transfers in the last seven years is £255,000 for gifts from 6 April 2003
onwards. Gifts above that are charged at the following rates:
| Chargeable legacies on death |
40% |
| Gifts within 7 years of death |
40%, with reductions if over 3 years before death |
| Lifetime chargeable gifts |
20% if the donee pays the tax, 25% if the donor pays |
Payment
Inheritance Tax (IHT) on a deceased's estate and on gifts within 7 years of death is generally payable at the end of twelve
months after the month of death, but it must be paid before probate is granted, and this may necessitate earlier settlement.
IHT on lifetime gifts is generally payable at the end of twelve months after the month in which the gift took place.
Major reliefs
The following transfers are exempt from IHT:
- the first £3,000 gifted in a tax year (unused limit may be carried forward for one year)
- small gifts of up to £250 to one person in a year
- normal expenditure out of income
- gifts between husband and wife, unless the donor is domiciled in the UK and the recipient is not
- gifts between individuals more than 7 years before the donor's death (until the donor dies such gifts are left out of
account as 'potentially exempt')
- gifts in consideration of marriage - £5,000 from a parent, £2,500 from a grandparent or a party to the marriage,
£1,000 from others
Most business and agricultural property enjoys a 100% relief once it has been owned for two years, although some types of property
are relieved only at 50%, and it is important to meet all the conditions.
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