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Inheritance tax

Inheritance tax (IHT) may be payable when an individual’s estate is worth more than the IHT nil rate band when they die.

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 previous death.

There are reliefs for some 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.

All the IHT rates and reliefs are unchanged from 2015/16.

Threshold

Standard nil rate band: £325,000

Rates

Rate %
Lifetime rate 20
Death rate 40
Death rate if sufficient charitable legacies made 36

Reliefs for lifetime gifts

Annual Exemption: £3,000

Small Gifts: £250

Marriage: The amount of relief depends on who the gift is from…

Gift from Amount (£)
Parent 5,000
Grandparent 2,500
Bride/groom 2,500
Other 1,000

Reduced charge on gifts within seven years of death

Years before death % of death charge
0-3 100
3-4 80
4-5 60
5-6 40
6-7 20