Inheritance Tax Personal Allowances & Exemptions
Inheritance Tax is a tax on gifting on death or within seven years of death or on gifting into a trust.
You should be aware that the scenarios described in this article do not cover all possible inheritance tax planning issues and you should seek our specific advice in relation to your particular circumstances.
Your Personal Allowance
Each individual has a personal nil rate band allowance (currently £325,000) called the “nil rate band” below which Inheritance Tax is not chargeable. The tax rate on the excess gifted above the nil rate band is 40%. Hence an estate of £340,000 on death less the nil rate band of £325,000 leaves a taxable amount of £15,000 at 40% which results in a tax bill of £6,000.
Married Couples or Civil Partners combined Allowances
For deaths occurring after 9th October 2007 a personal nil rate band allowance can be transferred to the estate of a surviving spouse or civil partner upon their death. This will depend on whether the estate of the predeceased spouse or civil partner used their personal nil rate band allowance. Any unused percentage of a nil rate band of predeceased spouse or civil partner can be transferred to be used in the estate of the surviving spouse or civil partner when they die. For example if a wife or surviving civil partner was left all of the assets of a predeceased husband or civil partner (as all gifts between spouses and civil partners are exempt anyway) the available additional allowance on the death of that wife or surviving civil partner in that situation would be 100% so the nil rate band available on the death of the survivor is uplifted by 100% i.e. £325,000 x 2 = £650,000.
There are a number of exemptions to Inheritance Tax which include:
- gifts to charities
- gifts to a husband or wife (spouse)
- One annual gift of £3000 or individual gifts of £250.
Thus an entire estate of any size (e.g. £1 million) left to a spouse is entirely exempt. Both spouses have their nil rate band allowance (currently £325,000) and so potentially a husband and wife have joint nil rate band allowances of £650,000. Each personal nil rate band can only be utilised if left to someone other than a spouse or charity. Please also see our article on the Residential Nil Rate Band
Reducing Inheritance Tax by giving to Charity
From 6 April 2012, if you leave 10 per cent of your estate to charity the inheritance tax due on the rest of your estate may be paid at a reduced rate of 36% instead of 40%. See Reducing Inheritance Tax by Charitable Giving
The information contained in this article is relevant to the date upon which it is distributed; advice given verbally by Wilson Nesbitt is also only relevant to the day upon which it is given. Tax laws change every year and it is the individual responsibility of each Wilson Nesbitt client to ensure that their Will reflects the current legal and tax position. Wilson Nesbitt cannot and do not give any assurance whatsoever that the legal and tax position at the date of death of a client will be the same as at the date advices are given or Wills are executed.
Gilbert Nesbitt & Lenore Rice
Gilbert and Lenore are senior partners of Wilson Nesbitt, solicitors. Gilbert has been a solicitor since 1978 and a partner in the firm since 1982. Gilbert has been a member of the Society of Trusts and Estate Practitioners since shortly after it’s foundation in the 1990s. Lenore has been a solicitor since 2009, a partner in Wilson Nesbitt since 2012 and a member of the Society of Trusts and Estate Practitioners for the last ten years. They share responsibility for the tax, trust, wills and estate administration department of Wilson Nesbitt assisted by six specialists. Either Gilbert or Lenore are happy to have a phone or video call or meet clients face to face (behind Perspex screens) to discuss Inheritance Tax, complex Will planning or other matters in either our Belfast or Bangor offices.
POSTAL WILL OR ENDURING POWER OF ATTORNEY MAKING
We provide you with a free postal information pack on how to make your Wills and Enduring Powers of Attorney by completing and returning a questionnaire to us, receiving draft Wills and Enduring Powers of Attorney from us for you to review, using our phone helpline and then receiving you are ready to sign Will & Enduring Power of Attorney with instructions on how to sign the documents in accordance with the legal requirements.
Take the next step and call us on freephone number 0800 840 9293 or email Wills@Wilson-nesbitt.co.uk to request a free postal Wills & Enduring Powers of Attorney information pack on how you can use our postal service at little cost to make your Wills, make your Enduring Power of Attorney, gift transfer your property or arrange a phone or video call or face to face (behind Perspex screens) consultation with one of our solicitors on making your Will, Inheritance Tax planning, gifting or other tax planning matters.
See our other articles on Inheritance Tax, Making your Will or Enduring Power of Attorney:-
- Making a Will;
- Enduring Powers of Attorney;
- Inheritance Tax Residential Nil Rate Band;
- Inheritance Tax Seven Year Rule;
- Inheritance Tax & Deeds of Variation
- Inheritance Tax Business Property Relief;
- Inheritance Tax Trust & Trustees;
- Joint Tenants or Tenants in Common?
- Reduce Inheritance Tax by Charitable Giving;
- Standard Provisions of the Society of Trust & Estate Practitioners;