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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 rate20%
Death rate40%
Death rate if sufficient charitable legacies made36%

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
0-3100
3-480
4-560
5-640
6-720