IHT

Question 1

IHT Rate

Answer 1

40% on transfers of an estate that exceed the Nil Rate Band (NRB) of £325,000 and any available reliefs.

Question 2

Payment Deadline

Answer 2

IHT is due 6 months from the end of the month in which the decedent died.

Question 3

Who Pays

Answer 3

Tax is payable by the Personal Representatives (PRs) of the estate.

Question 4

Deductibles

Answer 4

Funeral expenses and debts are deducted from the net value of the estate.

Question 5

Nil Rate Band (NRB)

Answer 5

£325,000. Can be uplifted by the deceased’s spouse’s unused NRB.

Question 6

Residential NRB

Answer 6

£175,000 for the deceased’s private residence if proceeds or residence are left to lineal descendants.

Question 7

Residential NRB

Answer 7

Estates with a net value over £2m see the Residential NRB tapered away at a rate of £1 for every £2 over the limit.

Question 8

Residential NRB

Answer 8

Can be uplifted by the deceased’s spouse’s unused Residential NRB.

Question 9

Residential NRB

Answer 9

Downsizing addition available.

Question 10

Gift with Reservation of Benefit

Answer 10

If an individual gives a gift but continues to benefit from it (e.g., living rent-free in a house given to a child), the gift is treated as part of the deceased’s estate for IHT purposes, unless market value is paid for the continued use.

Question 11

Lifetime Gifts

Answer 11

Taxable if the transferor dies within 7 years of making the gift.

Question 12

Non-Domiciled Individuals

Answer 12

IHT only applicable to assets located in the UK.

Question 13

Exempt Transfers

Answer 13

1. Gifts to spouse or civil partner (if the spouse is not domiciled in the UK, only the first £325,000 is exempt).

Question 14

Exempt Transfers

Answer 14

2. Gifts to charities (if gifts to charities exceed 10% of the estate, IHT rate becomes 36%).

Question 15

Exempt Transfers

Answer 15

3. Gifts < £250 (Lifetime Gifts only).

Question 16

Exempt Transfers

Answer 16

4. Wedding gifts (up to £5,000 as a parent) (Lifetime Gifts only).

Question 17

Exempt Transfers

Answer 17

5. Normal expenditures out of income (e.g., Christmas presents) (Lifetime Gifts only).

Question 18

Annual Exemption

Answer 18

£3,000 can be offset against gifts each year. Can be carried forward only once to make £6,000.

Question 19

Chargeable Lifetime Transfers (CLTs)

Answer 19

Tax rate is 20% if paid by the trustees or 25% if paid by the donor (immediately chargeable).

Question 20

Taper Relief

Answer 20

Reduces IHT owed if there are more than 3 years between the date of the Potentially Exempt Transfer (PET) and the donor’s death.

Question 21

Taper Relief

Answer 21

Reduces the tax owed by 20% for each year prior to the 3-year period before death.

Question 22

Business Relief

Answer 22

Reduces the value of business property given as a lifetime gift to a trust or at death.

Question 23

Business Relief

Answer 23

Applied before the annual exemption.

Question 24

Business Relief

Answer 24

100% Relief:Transfers of sole trade business or partnership interests, or shares in an unlisted trading company.

Question 25

Business Relief

Answer 25

50% Relief:Transfers of shares in a quoted trading company if the donor holds more than 50% of the voting shares, or transfers of land, buildings, or machinery used by a partnership or company the donor controls.

Question 26

Business Relief

Answer 26

Relief only available if the business is trading and the donor owned the property for at least 2 years.

Question 27

Agricultural Relief

Answer 27

100% Relief: Applies to agricultural land or buildings used for agriculture in the UK, Channel Islands, Isle of Man, or EEA states.

Question 28

Agricultural Relief

Answer 28

Relief is available if the donor has owned the property for at least 2 years and used it in their business.

Question 29

Agricultural Relief

Answer 29

Also available if the donor leased the property to a trust for agricultural use by tenants, and the donor owned the property for at least 7 years.

Question 30

Agricultural Relief

Answer 30

A farmer running a business can qualify for both business and agricultural relief.

Question 31

Quick Succession Relief

Answer 31

Applies when someone dies within 5 years of inheriting an asset on which IHT was previously paid.

Question 32

Quick Succession Relief

Answer 32

Decreases by 20% for each year between the donor’s and the recipient’s death.