IHT: the charge to IHT Flashcards
what is the limit on transferable nil rate bands?
max is £325,000. no matter how many extra people you marry.
How to calculate inheritance tax on death?
- cumulative total of lifetime transfers made 7 years prior to death.
- identify and value taxable estate.
- deduct any debts/liabilities.
- deduct exemptions/reliefs.
- apply RNRB.
- apply NRB.
- 40% taxed.
what are the rules to do with related property and their value on death?
if assets owned by spouses are worth more when valued together, each party’s share is valued at the proportionate share of the combined total.
if owned by siblings e.g- worth its individual amount.
what are the rules to do with joint property?
Where land is co-owned (not spouses), the value of the deceased’s share is reduced by 10% to reflect the difficulty of selling a share of the property rather than the whole
what the the 4 main exemptions/ reliefs for IHT on death?
- Spouse exemption.
- charity exemption.
- business property relief.
- agricultural property relief.
what are the 4 types of business property relief?
unquoted shares (private company)- 100%
quoted shares - 50% (must own more than 50% of shares in company)
sole trader or partnership interest- 100%
assets owned for business purposes- 50%
(must have owned for at least 2 years prior to transfer)
when is the deadline for reporting to HMRC for iht?
for submitting account- 12 month since end of the month when death occurred.
for paying IHT- 6 months from end of the month in which death occurred.
what is an exempt excepted estate?
gross estate is no more than 3 mil and after debts deducted/exemptions applied, the net value is below NRB.
CANNOT BE EXCEPTED IF
1. made a GROB.
2. trust worth more than £250,000.
3. foreign assets worth more than £100,000.
4. value of specified transfer exceeds £250,000.
who is liable to pay IHT due on a LCT or PET?
LIFETIME RECIPIENT (DONEE) is liable to pay IHT due.
how to calculate inheritance tax on lifetime transfers?
- Cumulative total.
- Identify valued transferred.
- Apply exemptions and reliefs.
- Apply NRB.
- Taxed 20% for LCT, 40% on death.
- Taper relief.
- Credit for tax paid in lifetime (ONLYA FOR REASSESSED LCT)
What are the different bands of taper relief?
3-4 years- 20% reduction.
4-5 years- 40%
5-6- 60%
6-7- 80%
what is the annual exemption for lifetime transfers?
£3000.
- can go back one year to £6000 if no transfers have been made.
what is the marriage exemption?
£5000 made by one parent (can be 10k for both)
£2500 if made by one party of the marriage to another.
£2500 if made by remote ancestor.
£1000 in any other case.
(can be combined with annual exemption)
what is the threshold for the residence nil rate band to apply?
2 million. no rnrb available for estates worth 2,350,000 or more.
when does a pension form part of an estate?
lump sum on death.
