- Personal Allowances
Each person has £325,000 called the Nil Rate Band, anything over this is taxed at 40%.
- Spouse’s Exemption
There is no Inheritance Tax payable on transfers (gifts), whatever the value, between married couples or civil partners.
- Annual Exemption
The first £3,000 given as a gift in any tax year (spouses/civil partners each have their own exemption).
- Gifts in Consideration of Marriage
Parents can give gifts up to £5,000 to each of their children as the bride or groom, grandparents £2,500 to each of their grandchildren and £1,000 can be given to anyone else. Such gifts must be given before the wedding day and not after.
- Small Gift Exemption
Up to but no more than £250 to any number of persons in each tax year.
- Other Gifts Exemption
You can make any number of gifts to any number of people as long the gifts are made, and can be proven, to come from income and not capital.
- Charities and Political Parties
There is no Inheritance Tax payable in these instances, whether given during your lifetime or on death.
- Trusts
There is no Inheritance Tax payable on Trusts for the vulnerable.
- Business and Agricultural Relief
There is no Inheritance Tax payable in a business, farm or on shares in a qualifying unlisted company if held for more than 2 years or on let farmland if held for more than 7 years. In these instances they qualify for 100% relief. Any assets used by a qualifying company or business or a listed company with a controlling qualifies for 50% relief
- Potentially Exempt Transfers
In most cases, any gift or transfer over the exempt gift allowances above is a Potentially Exempt Transfer (PET). This means that the donor has to live for 7 years from the date of the transfer or order for there to be on inheritance payable on such a gift or transfer. The longer the term after the gift has been made, the greater the reduction of inheritance tax that has to be paid. This is known as Taper Relief. This relief does not apply to gifts below the nil rate band, only those above it. The reliefs are as follows:
| Period of Years before death
0-3 Years 3-4 Years 20% 4-5 Years 40% 5-6 Years 60% 6-7 Years 80% More than 7 Years |
%age reduction (i.e. tapering relief)
Nil 20% 40% 60% 80% No Tax |
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