Chapter Four - Inheritance Tax Flashcards
When can you use the Annual Gift Allowance of £3,000?
This can be used on any gifts, whether it is a PET or a CLT
If you make a gift to charity 10% greater than taxable estate, you can pay IHT at 36%, how do you calculate this?
Total estate (including charity gift) less exemptions and spouse exemptions less NRB/RNRB = Taxable Estate If the gift / Taxable Estate is more than 10%, can tax at 36%, if not then tax at 40%. Remember to take off the charity gift from the taxable estate once charity test has been done.
What is Quick Succession Relief?
If you die within 5 years of receving someones estate, you can get relief on your estate to avoid double taxation.
The forumla is amount of IHT paid X Value (minus tax) divided by value + tax then multiplied by the relief depending on the number of years
How do you calculate how much of the NRB can be transferred to spouse if part of it has already been used?
Amount used / NRB at the time then multiply by £325,000 (current NRB)
What is Business Relief?
Relief on transferring business or shareholdings, which can be 100% or 50% and need to be held for 2 years
What qualifies for 100% Business Relief and what qualifies for 50%?
100% is for sole trader and partnership businesses or high risk shares, such as quoted companies, AIM, EIS ror VCTs. 50% is for shareholdings in listed companies
What is Agricultural Relief?
This is for land crops anf farm buildings and the relief can be 100% or 50% and it must be held for 2 years or 7 years if it has been let out.
What qualifies for 100% and 50% Agricultural Relief?
100% is for any land / farm that has been held for 2 years and 50% for rented out land, but it will be 100% if tenancy exceeds 12 months
What is Gift with reservation?
When you make a gift but still benefit from it. i.e. a holiday home. The gift will remain in the settlors estate until they stop benefiting from the asset. Once they stop benefitting, the gift will become a PET.
What is the rule with spousal exemption and non and UK domiciled?
If the person who dies is a UK domicile and the partner is a non-uk domicile, spousal exemption isn’t available. The surviving partner will be given an exemption of £325,000.
