Business & Accountancy Services
INHERITANCE TAX Earnings 2007/08 2008/09 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 tax Reduction in tax Effective Tax rate 0-3 0% 40% 3-4 20% 32% 4-5 40% 24% 5-6 60% 16% 6-7 80% 8% Main exemptions Spouse Unlimited 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 parties Unlimited 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 years 100% Assets used by qualifying company or business, or controlling holding in listed company 50% 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.