INHERITANCE TAX
Inheritance tax is charged on the value of a deceased
person’s estate above the tax free limit of £275,000.00 (there
will be a small increase in the tax free amount in April 2006).
The rate of tax is 40% on all estate above the tax free limit so
on an estate of £500,000.00 your family could face a tax bill of
£90,000.00. Fortunately there are a number of measures available
to help to reduce or eliminate entirely the eventual tax bill
and our Solicitors will be happy to discuss these with you.
The main exemptions and reliefs are as follows:
The Spouse Exemption
Gifts between husband and wife are normally exempt from IHT.
The Charity Exemption
Gifts to registered charities are exempt from IHT.
Business Property Relief
This relief covers various interests in a business including
(subject to certain conditions):
- shares in an unquoted company – here the relief is 100%
and
- shares in a quoted company which carry control of the company
- here the relief is 50%
Lifetime Gifts
Most lifetime gifts are exempt from IHT provided that:
- the donor lives for at least seven years thereafter
and
- does not reserve any benefit in the gifted asset.
The annual IHT exemption:
Gifts of up to £3,000 in each tax year are exempt and any
exemption not used in one tax year can be carried forward to the
next.
Marriage Gifts
Gifts in consideration of marriage are exempt, as follows:
- by a parent of the bride or groom - £5,000
- by a grandparent of the bride or groom - £2,500
- by any other donor - £1,000
Small gifts
Small gifts of up to £250 to any number of people are exempt,
provided that the total of gifts per donor to each individual
does not exceed £250 in the tax year.
Normal gifts
from income
Lifetime gifts made regularly out of
income each year are exempt, provided they do not affect the
donor’s usual standard of living.
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