Inheritance Tax Flashcards

1
Q

Basics of iht

A

Transfers on death and transfers within 7 years of death or chargeable transfer during life:

0% on 325k being the NRB. And 175k on the first 175k of property for most estates

40% above 325k

36% where least 10% of NET ESTATE is donated to charity

20% on Lifetime gifts above 325k

If a CLT is made and no other gift has been made this will take up the NRB and no tax will be due

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2
Q

Cumulation

A

The 7 year look back when considering if a gift will be a chargeable gain

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3
Q

Liability to IHT

A

Anyone who domicile will have liability to IHT on worldwide assets

Anyone non domicile will only have IHT on the UK based assets

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4
Q

Mitigate a liability to IHT

A

Give away assets
Give away but keep control- trusts
Insure against liability

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5
Q

Residence nill rate band

A

Where part of estate is made up of a main residence, the residence nrb is applied, giving each person 175k relief

In order to qualify.
Person must die after 2017
Person must own home or share of one
Their direct descendants such as children or grandchildren must inherit the property or a share of it

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6
Q

Transferable NRB for IHT

A

Where a partner dies the estate automatically transfers across to surviving spouse, using no NRB, where this is the case the surviving spouse can use that NRB when they die

If gift X amount to daughter this will use up% of NRB

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7
Q

Giving money away using exemptions

A

Annual exemption - 3000
You can back date this 1 year so if don’t use any can give 6000
Note if want to give 5k it will use 3k from this year and 2k carried over from last year and next year back to 3k

Small gift exemption - available to unlimited amount of people to give 250, providing none benefit from 3k

The ‘normal out of income exemption’ - gifts made from surplus income, providing individuals standard living not comprised. Examples protection premium s it regular savings for children i.e jisa

Gifts in consideration of marriage / civil partnership - 5k from parents, 2.5k grandparents, 1k anyone else

Unlimited gift to charity or political parties

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8
Q

Gifts between spouses and civil partners

A

Gifts between spouses and civil partners providing both are UK domicile are exempt in full

Where one is UK Dom and one is not, 325k NRB is avail plus’s special 325k additional NRB so 650k can be transferred

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9
Q

Chargeable lifetime transfers CLTs

A

Where one person’s estate goes down in value but no one else’s goes up in value

Where the gift is above the NRB on the 7 year look back this will draw an immediate tax charge of 20%.

I.e if 325k CLT is the only transfer made no tax due at 20% as is within NRB

Payment practically is due 6 months after the transfer was made

If death occurs within 7 years the CLT will be bought back into the estate and a further 20% will be due

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10
Q

Potentially exempt transfers

A

one ones estate goes down and another’s goes up

PET are never chargeable whilst the individual is still alive and only have IHT liability if donor dies in within 7 years over NRB

If donor survives 7 years, it becomes an exempt transfer

If not it is a chargeable transfer and comes back into donors estate

As with CLT oldest gives takes up first part of NRB.

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11
Q

Taper relief

A

Relief on the tax due not the gift itself

Where 3k allowance not used, this can be taken off before considering tax.

0-3 - 40%
3-4 - 32%
4-5 - 24%
5-6 16%
6-7 - 8%

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12
Q

Simultaneous death

A

Where both parties if a married couple die together, general rule is oldest died first but for IHT they are deemed to die together

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13
Q

Quick succession relief

A

Where tax is paid in transfer if death then the beneficiary does shortly afterwards, not fair for second liability of tax to arrive relief as follows

0-1 year 100% relief
1-2 80%
2-3 60% …

Calculation as follows

(Net gift received/gross gift received) X tax paid , QSR %

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14
Q

Reliefs for IHT

A

Business relief - 100% for interests in unincorporated businesses e.g. sole traders or partnerships or for any shareholding in AIM it EIS and SEIS

To qualify must be held for 2 yrs

Agricultural property relief

Land, building, crops but not livestock or equipment

100% for owner occupied farms, 50% for interest in let farms where lease is over 1 year period

Woodland relief

Applies to timber and not land value, tax deferred until timber is actually sold

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15
Q

Pre owned asset tax

A

Where give away asset but still get benefit from it - taxed through income tax on annual basis

No tax due where benefits in a year do not exceed 5k

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16
Q

If seller pays tax on CLT it is at 25% not 20%

A