WE 3 Bit on IHT

Question 1

What is the lifetime rate of IHT?

Answer 1

20% (payments into trust)

Question 2

What is the Death rate of IHT?

Answer 2

40%

Question 3

What is the value of a transfer of value for a lifetime transfer?

Answer 3

Loss in value to the donor

Question 4

What is the value of a transfer of value for the death estate?

Answer 4

Market Value

Question 5

How much is the Nil rate band?

Answer 5

£325,000

Question 6

How much is the Residence Nil Rate Band?

Answer 6

£175,000 - applies after 06.04.2017

Question 7

What happens if a donor subject to a lifetime chargeable transfer dies within 7 years?

Answer 7

The LCT will be reassessed to tax at the death rate of 40%

Question 8

What is the ‘Cumulative total’?

Answer 8

The total chargeable value of all chargeable transfers made in the previous 7 years. The cumulative total is taken off the NRB when calculating IHT on death.

Question 9

What is the process for calculating IHT on lifetime estate?

Answer 9

a) Calculate the cumulative total
b) Identify value transferred
c) Apply exemptions and reliefs
d) Apply basic NRB and calculate tax

… after death:
e) Apply taper relief
f) Give credit for tax paid in lifetime.