Inheritance Tax

By December 16, 2018 No Comments

Inheritance Tax:

The tax that is charged on the property, money, and possessions of a person who died is called inheritance tax. And this tax will be paid from the death estate to HMRC by the trustee of the estate or representative.

Inheritance Tax Threshold:

No inheritance tax will be charged on the amount of the death estate that is below £325,000.

Exempt amount other than Threshold:

The deceased person left the property, money or other possessions for spouse or civil partner or for charity above the threshold amount of £325,000 are tax-free.

The threshold of Inheritance Tax can be increased to £900,000:

  • Individuals threshold can increase from £325,000 to £450,000 by leaving home to their children or adopted child or grandchildren.
  • This threshold can further increase to £900,000 when spouses or civil partner`s death estate value is less than the threshold. Any unused threshold can be transferred to the deceased`s partner death estate.

Rates of Inheritance Tax:

  • 40% tax will be charged on the death estate after the deduction of threshold and other exemptions.
  • This rate will reduce to 36% on few if an individual left 10% of its death estate to charity.

Reliefs on Inheritance Tax:

  • 7 Years Rule:

When an individual gives away the home to a spouse or civil partner in his/her life and survived 7 years after this transfer than no inheritance tax will arise on death.

Whereas if individual die within 7 years after the transfer this will treat as gift and tax will be calculated according to it.

Exemption on transfer made during lifetime:

  • Annual exemption of £3,000 is available and any unused annual exemption of previous can carry
  • Gifts amount of £250 or less are exempted
  • Gifts received on marriage are exempted that includes
  1. Up to £5,000 from Parent are exempted.
  2. Up to £2,500 from remote families or from spouse family
  3. Up to £1,000 from random people are exempted.
  • Receiving of daily expense for a living are also exempted.


Transfer during lifetime or after death:

Any transfer to spouse or civil partner is exempt during lifetime or after death.

Other Reliefs on Inheritance Tax:

  • Fall in Value Relief:
  • Relief on business property transfer
  • Relief on Agricultural property transfer

The payment schedule for IHT:

TransfersWho will Pay TAXDue Date


Chargeable Lifetime Transfer Lifetime-TaxThe donor will pay tax until unless the receiver agreed to pay


Later of

30 April after the tax years’ end.


6 months after the month of transfer


Chargeable Lifetime Transfer Lifetime-TaxThe trustee will pay the tax6 months after the month of donor`s death


Potential exempt TransferThe receiver will pay the tax6 months after the month of donor`s death


Death EstateThe trustee or personal representative will pay the taxEarlier of

Delivery of accounts

6 months after the month of donor`s death


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