Inheritance Tax

Losing a love one is emotional and stressful time and it come a surprise to grieving family members when tax authorities extend their ever extending network to extract money they deem should be paid to them. It is sometime interpreted that tax authority is attempting to benefit from death of your love however they believe they are only on their statutory duties.

Inheritance tax explanation:

This is a tax levied (currently 40%) on the death of an individual’s estate that is transferred to nominated beneficiaries should it above certain threshold amount (currently £325,000 normally referred to as subject to a nil rate band) and it may be payable on trusts and gifts made within 7 years of the individual’s death to non-exempt beneficiaries.

The Inheritance Tax threshold (or ‘nil rate band’) is the amount up to which an estate will have no Inheritance Tax to pay.

Inheritance Tax table




Standard threshold



Combined threshold maximum for married couples and civil partners



 Rate of tax on balance:



Chargeable lifetime transfers



Transfers on, or within 7 years of, death



If the estate including any assets held in trust and gifts made within seven years of death and if is more than the threshold, Inheritance Tax will be due at 40 per cent on the amount over the nil rate band. From 6 April 2012 people who leave 10 per cent or more of their net estate to charity can choose to pay a reduced rate of Inheritance Tax of 36 per cent.

Inheritance Transfers

All lifetime transfers not covered by exemptions and made within seven years of death will be added back into the estate for the purpose of calculating the tax payable. Tax attributable to such transfers is then reduced:

Years before death 0-3 3-4 4-5 5-6 6-7
Tax reduced by 0% 20% 40% 60% 80%

Main Exemptions and limits from Inheritance tax

  1. Most transfers between spouses and civil partners.
  2. The first £3,000 of lifetime transfers in any tax year plus any unused balance from previous year.
  3. Gifts of up to but not exceeding £250 p.a. to any number of persons.
  4. Gifts in consideration of marriage or civil partnership of: up to £5,000 by a parent, up to £2,500 by a grandparent, or up to £1,000 by any other person.
  5. Gifts made out of income that form part of normal expenditure and do not reduce the standard of living.
  6. Gifts to charities, whether made during lifetime or on death.

Expert advice and help

The moment you decide that a certain level of your estate should be passed on to your love ones careful consideration about probable impact of taxation on your estate for intended beneficiaries should not be ignored. It is paramount that your interests are protected to ensure intended beneficiaries retain maximum accrued value and reduce paying avoidable tax amount.

If you find yourself needing advice we are willing to offer relevant support to protect your rights and essentially prepare you and beneficiaries for future period. Please contact PMCT Accountants & Consultants to ensure objective of accrued estate is not passed on to unintended beneficiaries.

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