Inheritance Tax: The Death Estate

Question 1

Who pays tax on the death estate and what is the rate?

Answer 1

Tax on the death estate is paid by personal representatives at 40%

Question 2

When assets are jointly owned, the ‘related property rule’ must be considered when valuing assets. Does this rule apply to everyone?

Answer 2

No, only spouses

Question 3

What is the tax rate when part of estate is left to charity?

Answer 3

If 10% or more of the deceased’s net estate has been left to charity, the estate is taxed at 36% as opposed to 40%.

Question 4

What is the baseline amount?

Answer 4

• The value of the estate charged to IHT after deducting all available reliefs, exemptions and available NRB
• Residence NRB excluded when calculating baseline amount

Question 5

Can uplifted NRB be used against lifetime tax on chargeable transfers?

Answer 5

No, the transferable NRB can only be used on the death estate

Question 6

From how many spouses can the NRB be transferred?

Answer 6

Up to 2

Question 7

What is the residence nil rate band?

Answer 7

• Applies if estate includes home used for deceased’s private residence if the residence is left to lineal descendants (includes step-children)
• £175,000

Question 8

Residence NRB is tapered for estates exceeding what value?

Answer 8

• 2 million
• The amount over 2 million will be deducted

E.g. Estate of £2.3 million. The amount over £2m is £300,000. 50% of this would be £150,000. Therefore, the residence NRB of £175,000 would be tapered by £150,000 leaving a residence NRB of £25,000

Question 9

Is the residence NRB transferrable?

Answer 9

Yes, it is possible to transfer from up to two spouses