IHT

Question 1

What can inheritance tax be charged on?

Answer 1

(A) on death on the value of an individuals estate.

(B) lifetime gifts by one individual to another within 7 years.

(C) lifetime gifts to a company or into a trust

Question 2

What is a PET?

Answer 2

Potential exempt transfer.

Will be exempt if the doner survives for 7 years after the transfer being made.

Question 3

What is the calculation of liability to IHT on death?

Answer 3

Taxed at 40% (rarely 36%).

Resident nil rate band can be used if the estate includes a qualifying residential interest (175,000).

Nil rate band (325,000).

Question 4

What is the calculation of liability to IHT on lifetime transfers?

Answer 4

• life chargeable transfers taxed at 20%
• PETs that become chargeable as a result of death would be taxed at 40%

Question 5

What exemptions and reliefs can be applied to transfers?

Answer 5

Spouses and charities are exempt.

Annual exemption (3,000).

Small gifts (250).

Marriage gifts (5,000).

Gifts made as normal expenditure e.g. paying for your child’s uni fees.