Who pays Inheritance Tax?

Date

Posted by

Who pays Inheritance Tax?
James Mee

Share the article

Share on facebook
Share on twitter
Share on linkedin

Posted by

Who pays Inheritance Tax?
James Mee

Share the article

Share on facebook
Facebook
Share on twitter
Twitter
Share on linkedin
LinkedIn
Inheritance Tax (IHT) is commonly collected on a person’s estate when they die but can also be payable

Who pays Inheritance Tax?

Inheritance Tax (IHT) is commonly collected on a person’s estate when they die but can also be payable during a person’s lifetime on certain trusts and gifts. The rate of IHT currently payable is 40% on death and 20% on lifetime gifts.  IHT is payable at a reduced rate on some assets if 10% or more of the ‘net value’ of their estate is left to charities.

Funds from the estate of the deceased are usually applied to pay IHT. If there is a will, it is usually the executor who deals with paying any IHT due to HMRC. IHT can be paid from funds within the estate, or from money raised from the sale of the assets. The deceased may also have used a life insurance policy to fund the payment of some / all the IHT due.

There is a nil-rate band, currently £325,000 below which no IHT is payable. In addition, there is an IHT residence nil-rate band (RNRB) which relates to a main residence passed down to a direct descendent such as children or grandchildren. The RNRB of £175,000 (where available) is on top of the £325,000 IHT nil-rate band.

The recipient of gifts from the deceased may be personally liable to IHT if the deceased gave away more than £325,000 in the 7 years before their death. These lifetime transfers are known as ‘potentially exempt transfers’ or ‘PETs’. The rate of IHT gradually reduces over the 7-year period becoming exempt from IHT after 7 years have passed.

Some gifts will typically be tax-free from the time they are made such as regular gifts made from excess income, the first £3,000 worth of gifts each tax year and gifts between spouses and civil partners.

If you want to speak to us about IHT, get in touch with us here.

Source: HM Revenue & Customs Tue, 27 Jul 2021 00:00:00 +0100

More articles

Inheritance Tax and Domicile
Inheritance Tax and Domicile
November 25, 2021
 by James Mee
Inheritance Tax and Domicile Domicile is a general legal concept which in basic terms is...
CGT Roll-over Relief for Businesses
CGT Roll-over Relief for Businesses
November 25, 2021
 by James Mee
CGT Roll-over Relief for Businesses Business Asset Roll-over Relief is a valuable relief that allows...
Claiming Capital Allowances for Structures and Buildings (SBA)
Claiming Capital Allowances for Structures and Buildings (SBA)
November 25, 2021
 by Kev Mileham
The Structures and Buildings Allowances (SBA) facilitates tax relief for qualifying capital expenditure