RMH Associates
Business & Accountancy Services

Inheritance Tax

INHERITANCE TAX
Earnings2007/082008/09
Threshold£300,000*£312,000
The Government has announced the IHT nil rate bands for 2009/10 - £325,000 2010/11 - £350,000
Lifetime gifts
Where tax is payable on a lifetime gift (other than those taxable only because they are made within 7 years of death) tax is charged at 20%

Most lifetime gifts are only charged to inheritance tax if made within 7 years before the donor's death.
In excess of the nil rate band they are charged on the following scale
Years between gift and taxReduction in taxEffective Tax rate
0-30%40%
3-420%32%
4-540%24%
5-660%16%
6-780%8%
Main exemptions
SpouseUnlimited
Non domiciled spouse£55,000
Annual gifts per donor£3,000
Small gifts per donee not exceeding£250
Marriage gifts by parent£5,000
Marriage gifts by other relative£2,500
Other marriage gifts£1,000
Charities/political partiesUnlimited
Business and agricultural relief
Interest held for more than two years in a business, farm or shares in qualifying unlisted companies and let farmland held for more than seven years100%
Assets used by qualifying company or business, or controlling holding in listed company50%



It is now possible to transfer unused nil-rate band allowances between spouses or civil partners.

For individuals who die on or after 9 October 2007 a claim may be made to utilise any unused nil rate band from their deceased spouse or civil partner's estate.


The amount of the nil rate-band potentially available for transfer will be based on the proportion of the nil-rate band unused when the first spouse or civil partner died.

If on the first death the chargeable estate is £156,000 and the nil-rate band is £312,000, then 50% of the original nil-rate band is unused. If the nil rate band when the surviving spouse dies is £350,000, then that would be increased by 50% to £525,000.