What are the current rates and allowances for Inheritance Tax (IHT)?
This is a freeview 'At a glance' guide to Inheritance Tax (IHT) rates and allowances.
|Death rate where 10% or more left to charity
|36% (from 2014-15)
*Increased by any unused portion of a predeceased spouse or civil partner's nil rate band. Finance Act 2021 provides that the nil rate band is frozen at £325,000 until April 2026, with Finance Act 2023 extending the freeze to April 2028.
**From April 2017 a new additional Residence Nil Rate Band (RNRB) is available to cover the family home. This has been phased in, beginning at £100,000 per individual and increasing by £25,000 each year until it reached £175,000 in 2020-21. Finance Act 2021 provides that the RNRB is frozen at £175,000 until April 2026, with Finance Act 2023 extending the freeze to April 2028. See Main Residence Nil Rate Band.
Tax is payable within six months of the end of the month of death e.g. a death in December 2021 will mean the IHT must be paid by 30 June 2022.
At a glance
Rates & Allowances
- Finance Act 2021 provides that the nil rate band will remain at £325,000 until April 2026. Finance Act 2023 provides for this to be extended to April 2028. The nil rate band is transferable between spouses and civil partners. See IHT: Transferable Nil Rate Band
- The Residence Nil Rate Band will remain at £175,000, also until April 2028, with tapering to continue to start at £2 million. This is transferable between spouses and civil partners. See IHT: Residence Nil Rate Band.
Offshore trusts and settlors
- Finance Act 2020 amends the legislation in respect of offshore trusts, property added to trusts by UK-domiciled or deemed domiciled individuals is no longer excluded property for IHT. See Non-domicile status, deemed domicile & tax and Non-resident trusts.
A non-UK domiciled individual is exempt from IHT on non-UK assets unless a spousal election has been made.
- Individuals may be deemed to be UK domiciled for IHT purposes. This may be due to being:
- Domiciled in the UK at any time in the three years immediately preceding the time at which the question of domicile arises.
- UK-born, with a UK domicile of origin and UK resident for at least 15 years in the past 20 years.
- The estate of a foreign domiciliary may be excepted, which means that there are no IHT reporting requirements to HMRC. This should be the case provided they died abroad, they have never held a UK domicile and the UK assets in their estate, passing by will or survivorship, are shares or cash with a death value of less than £150,000 (£250,000 for deaths after 1 January 2022). A full IHT account is required if:
- The estate contains overseas property which has value attributable to UK residential property.
- Chargeable gifts of over £3,000 were made in the seven years prior to death.
- See Non-domicile status, deemed domicile & tax and IHT: Gifts
Spouses and civil partners
Lifetime and death transfers between UK-domiciled spouses/civil partners are exempt from IHT. Any proportion of unused nil-rate band of the first spouse to die may be carried forward and added to that of the second spouse. See Transferable Nil rate band.
See IHT: Gifts
If a donation of at least 10% of the net value of the estate is made to charity the IHT rate decreases to 36%. The charity concerned will receive more if a donor is able to donate under the Gift Aid scheme whilst alive because the charity will be able to receive a basic rate tax credit. See IHT discount on charitable donations.
Business Property Relief (BPR) and Agricultural Property Relief (APR)
|Business property: a business, an interest in a business, unquoted shares (inc. AIM shares) and unquoted securities with control
|A controlling interest in a listed company
|Assets used by the transferor's controlled company or partnership, assets held in a trust of which the deceased was a beneficiary and used in their business
* Relevant business property must usually have been owned for at least two years prior to transfer/death.
APR (either 100% or 50%)
Given on the agricultural value of agricultural property which has been:
- Occupied by the owner for the purposes of agriculture for two years ending with the date of the transfer (death).
- Owned by them for seven years ending with that date and occupied throughout by them or another for the purposes of agriculture.
Certain gifts are exempt from IHT including those within the £3,000 annual exemption, small gifts of £250 per person per tax year and certain gifts on marriage.
See IHT: Gifts
Potentially Exempt Transfers (PETs)
Other gifts are taxable if the transferor dies within seven years of making the gift with a reduced charge (taper relief) if they survive at least three years.
See IHT: Gifts