WILLS AND PROBATE - INHERITANCE TAX QUESTIONS
Inheritance Tax Questions
We list here some of the many frequently asked questions we receive from our clients. If you have any other questions, please feel free to contact us using the details at the bottom of this page.
What is Inheritance Tax?
Inheritance Tax imposes a charge to tax on the value of a person's estate on death, the taxable measure being the value of the whole estate after various reliefs have been taken into account.
What are the rates and threshold?
The tax operates on a cumulative basis for each individual and is charged at a flat rate of 40%. Estates (taking into account the gifts made within 7 years of death) of up to £312,000 with effect from 6 April 2008 escape any inheritance tax, being below the threshold at which tax begins to bite. Such estates are referred to as being within the "nil rate band limit." The "nil rate band" as from April 2009 will be £325,000.
Is it now possible to use "unused" nil rate band in some circumstances?
Since 9 October 2007 it is now possible for spouses and civil partners to transfer their "nil rate band" allowances so that any part of the "nil rate band" that was not used when the first spouse or civil partner died can be transferred to the individual surviving spouse or partner for use on their death.
The claim to transfer unused nil rate band must be made by the accountable persons when the surviving spouse or civil partner dies.
If you are dealing with the estate of a surviving spouse or civil partner, you can make a claim to transfer the unused nil rate band from the estate of the first spouse or civil partner to die. To make a claim you will need to fill in a claim form. The form will ask information about the estate of the first spouse or civil partner to die that is necessary to calculate the amount of the nil rate band that was unused.
Where a valid claim to transfer unused nil rate band is made, the nil rate band that is available when the surviving spouse or civil partner dies will be increased by the proportion of the nil rate band unused on the first death. For example, if on the first death the chargeable estate is £150,000 and the nil rate band is £300,000, 50% of he nil rate band would be unused. If the nil rate band when the survivor dies is £325,000, then that will be increased by 50% to £487,500.
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