Useful Information

Inheritance Tax — this information is given for guidance only. If you are in the process of dealing with an estate and are in any way unsure about how to deal with Inheritance Tax and HMRC, we recommend that you seek professional advice from a suitably qualified professional.
Current IHT Threshhold — since 6th April 2009, the Inheritance Tax Threshold has been set at £325,000, and looks to remain the same for the foreseeable future. When dealing with estates, a beneficiary (except for the spouse) will have to pay Inheritance Tax on any amounts on the estate that exceeds this threshold.

The tax rate is currently 40%. Therefore if an estate is worth £400,000, then a beneficiary will have to pay 40% on £75,000 as this is the amount that exceeds the threshold. In the 2015 Summer Budget, the Chancellor, announced a new transferable main residence allowance, which will gradually increase from £100,000 in April 2017 to £175,000 per person by 2020/21. This is in addition to the main nil-rate band. It will effectively raise the IHT-free allowance to £500,000 per person. Where married couples jointly own a family home and want to leave this to their children, the total IHT exemption will be £1m.
Lifetime Gifts — lifetime gifts that were made by the deceased to any individuals more than seven years before their death, should not be brought into the deceased estate for Inheritance Tax purposes.

If a gift was made within seven years, normally the gift must be declared as part of the estate and Inheritance Tax will be payable on it (if exceeds the IHT threshold); the amount of Inheritance Tax may be reduced if the individual subsequently dies three years after making the gift (Taper Relief).
Taper Relief — taper relief may apply to lifetime gifts given by the deceased between three and seven years of the transfer, meaning that the tax rate that applies on these gifts may be different than the standard 40% rate that will apply to those gifts made within three years.

Taper relief is only applicable to those gifts which exceed the nil rate band. This means that cumulatively, all the gifts made within seven years have to exceed £325,000 for taper relief to even apply. The Administrator cannot add part of the estate to life time gifts which are less than £325,000 and then apply taper relief on the amount that exceeds the threshold when all assets are added together. For example, if all lifetime gifts are worth £200,000 and the remaining assets at the time of death are worth £200,000, taper relief cannot be applied on the £75,000 excess over the threshold, because the lifetime gifts are allocated against the nil rate band before any other assets.

Lifetime gifts that are less than £3,000 will be exempt from Inheritance Tax if they exceed the threshold, provided that only one of these gifts is made per year. This ‘annual exemption’ is time-transferable, meaning that if it is not used one year then this allowance can be transferred to the next year and two gifts of up to £3,000 each will be exempt. This rule applies only to a maximum of two years, and therefore it cannot be extended further to include annual exemptions that were not used for by the third year.
Jointly Owned Assets — when dealing with Inheritance Tax, if jointly-owned assets are involved, HM Revenue & Customs will need to be informed of precisely how much each individual contributed to the said joint assets.

If for example, A and B own a house jointly and B dies, if B contributed the whole amount, say £100,000 then this is the amount declared for Inheritance Tax. If B only contributed £40,000 then this is the amount that should be declared, as the remaining £60,000 was contributed by A and therefore belongs to the person who is still alive.
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Review from Mr D N
Very thorough service and can only praise Treethorpe on the way they handled our case.