Inheritance tax is an important consideration ‘but is notoriously complex’
Martyn Dobinson, partner at Saffery Champness, summarises what you need to know.
Alex Black Alex is business reporter at Farmers Guardian covering areas including commodity prices, imports and exports, property and land across all ...Load More Alex Black Alex is business reporter at Farmers Guardian covering areas including commodity prices, imports and exports, property and land across all ...Load More
Inheritance tax is an important consideration - ‘but is notoriously complex’
Inheritance tax (IHT) is payable at:
- 40 per cent on an individual’s death estate and gifts to individuals made in the seven years before death, tapered where the gift is survived by at least three years, and 20 per cent on chargeable lifetime transfers;
- the first £325,000 of value transferred is covered by the nil rate band;
- there is also a main residence nil rate band, currently £150,000.
IHT exemptions include:
- gifts to a spouse/civil partner;
- up to £3,000 per annum;
- regular gifts made out of surplus income;
- certain gifts on marriage/civil partnerships;
- gifts to charities or qualifying political parties;
- gifts of up to £250 per person per annum.
Other valuable reliefs include Agricultural Property Relief (APR) and Business Property Relief (BPR).
APR may apply to land and buildings used for qualifying agricultural purposes where they have been owned for at least two years where farmed by the owner, or seven years where farmed by a tenant.
If the land is in-hand, let on a Farm Business Tenancy (FBT) or the owner has the right to vacant possession within 24 months, the rate of relief is 100 per cent. Otherwise relief is generally at 50 per cent.
BPR provides relief at 100 per cent on the transfer of a qualifying business or unquoted trading company shares, or 50 per cent on the transfer of assets owned personally but used in a qualifying business controlled by the donor.
The asset must have been owned for at least two years.
APR takes priority over BPR. On death, there is no Capital Gains Tax, but an uplift in base cost for CGT.