Inheritance TAX (IHT)
- IHT may be payable when an individual’s estate is worth more than the IHT nil rate band when they die.
- Lifetime and death transfers between UK domiciled spouses are exempt from IHT.
- A further nil rate band of £175,000 may be available in relation to current or former residences.
- The IHT threshold available on death may be increased for surviving spouses as there may have been a nil rate band not used, or not fully used, on the first death.
- There are reliefs for some business and farming assets which reduce their value for IHT purposes.
- IHT 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 are also charges on some trusts.
IHT rates and nil rate band 2023/24 and 2022/23
| IHT nil rate | £325,000 |
| Lifetime rate | 20% |
| Death rate | 40% |
| Death rate if sufficient charitable legacies made | 36% |
IHT reliefs for lifetime gifts
| Annual exemption | £3,000 |
| Small gifts | £250 |
| Marriage/civil partnership | |
| – parent | £5,000 |
| – grandparent | £2,500 |
| – other spouse/civil partner | £2,500 |
| – other | £1,000 |
IHT – reduced charge on gifts within seven years of death
| Years before death | % of death charge |
|---|---|
| 0-3 | 100 |
| 3-4 | 80 |
| 4-5 | 60 |
| 5-6 | 40 |
| 6-7 |
20 |
- IHT may be payable when an individual’s estate is worth more than the IHT nil rate band when they die.
- Lifetime and death transfers between UK domiciled spouses are exempt from IHT.
- For 2021/22, a further nil rate band of £175,000 may be available in relation to current or former residences.
- The IHT threshold available on death may be increased for surviving spouses as there may have been a nil rate band not used, or not fully used, on the previous death.
- There are reliefs for some business and farming assets which reduce their value for IHT purposes.
- IHT 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 are also charges on some trusts.
IHT rates and nil rate band 2021/22 and 2020/21
| IHT nil rate | £325,000 |
| Lifetime rate | 20% |
| Death rate | 40% |
| Death rate if sufficient charitable legacies made | 36% |
IHT reliefs for lifetime gifts
| Annual exemption | £3,000 |
| Small gifts | £250 |
| Marriage | |
| – parent | £5,000 |
| – grandparent | £2,500 |
| – other | £1,000 |
IHT – reduced charge on gifts within seven years of death
| Years before death | % of death charge |
|---|---|
| 0-3 | 100 |
| 3-4 | 80 |
| 4-5 | 60 |
| 5-6 | 40 |
| 6-7 |
20 |