This is a freeview 'At a glance' guide to Inheritance Tax (IHT) rates and allowances.

What are the current rates and allowances for Inheritance tax?

  To 2021-22 To 2008-09
Nil-rate band*/** £325,000 312,000
Lifetime rate 20% 20%
Death rate 40% 40%
Death rate where 10% or more left to charity 36% (from 2014-15)  

*Increased by any unused portion of a deceased 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.

**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. 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 2019 will mean the IHT must be paid by 30 June 2020. 

See: Estate planning checklist

At a glance

Rates & Allowances

  • Finance Act 2021 provides that the nil rate band will remain at £325,000 until April 2026. This is transferable between spouses and civil partners. See IHT: Transferable Nil Rate Band
  • The Residence Nil Rate Band will remain at £175,000 until April 2026, 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

Non-domiciled individuals 

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 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

Charitable donations

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 reliefs

Business property: a business, an interest in a business, a controlling interest of unquoted shares (inc. AIM shares) and unlisted shares (private company shares) 100%
Agricultural property 100%
A controlling interest in a listed company 50%
Assets used by the transferor's company or ex-partnership, assets held in a trust of which the deceased was a beneficiary and used in his business 50%

 * Relevant business property owned for at least two years prior to transfer/death.

For further details see: the Private Client section for IHT: Business Property Relief and IHT: Agricultural Property Relief.

Exempt gifts

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 

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