Inheritance Tax Flashcards
(35 cards)
what is the IHT rate
40%
How are lifetime chargeable transfers [made into trusts] charged
immediately chargeable at 20% reassessed if dies within 7 years
How are lifetime chargeable transfers [made to individuals] charged
not immediately chargeable but will become so if they exceed nil rate band and are made within seven years of the donor’s death
what is IHT
Tax paid on the estate of a deceased person
what is the Nil Rate Band (NRB)
£325,000 at 0% chargeable rate
what is a chargeable transfer
transfer of value made by an individual which is not an exempt transfer
what is a transfer of value
A ‘disposition’ which results in an immediate decrease in the value of the individuals estate
what is the transfer of the NRB
- If a married individual dies and some/all of their NRB remains unused, the PRs of the surviving spouse can claim an increase in the survivor’s NRB equal to the unused percentage of the first spouse’s NRB
- Inherit some/all dead spouse’s unused NRB (equal to unused percentage)
- If survives multiple spouses, can claim TNRB for all of them [cap of 100% NRB]
when do you need to make a claim for the TNRB
within 2 years of the end of the month of death & separate claims for different spouse
what is the RNRB
residence nil rate band = £175,000
Qualifying Residential Interest + inherited [by will/intestacy/survivorship] + by a direct descendant
what counts as a direct descendant for RNRB
Child, grandchild, great grandchild + adopted/step/foster/guardian + any of their spouses/CP/widows
what is the taper withdrawal
For properties over 2million - when this threshold is exceeded, the RNRB is reduced by £1 for every £2 of value by which an estate exceeds the taper threshold. Tapering can reduce the RNRB to zero.
NONE available for properties over £2.3mil (or £2.7mil where transfer applies)
can you transfer unused RNRB?
YES to surviving spouse
how do you qualify for transfer of RNRB
Deceased gave away their QRI or downsized to a less valuable QRI on/after July 2015; the former home would have been a QRI if retained; a DD inherits the replacement QRI and/or other assets
when does a PET become chargeable?
if they do not survive 7 years after making the transfer
what are the steps for calculating IHT on the death estate?
- calculate cumulative total
- identify assets included in the taxable estate
- value the taxable estate
- deduct debts & expenses
- apply exemptions & reliefs
- apply RNRB
- apply basic NRB/TNRB & calculate tax
what does spouse exemption amount to
100% off IHT
what are the IHT EXEMPTIONS for lifetime & death
spouse exemption
charity exemption
gifts to political parties
gifts of land to housing associations
gifts to heritage maintenance funds
gifts to employee benefit trusts
what does charity exemption amount to
100% exemption to any charity
if 10% of estate is left to charity; then IHT reduces to 36%
What is BPR and what assets qualify
business property relief
QA:
Private shares (100%); Listed shares if 50%+ ownership (50%); ST/Partner (100%); assets owned by them but used for business (50%)
owned for 2 years
what is APR and what assets qualify
agricultural property relief
QA:
Agricultural land & buildings; Farms/Cottages (if farm worker)
Occupied for agricultural purposes 2 years before; OR owned by the transferor & occupied by them/another for agricultural purposes 7 years before [fine if replaced, if from spouse = inherits ownership period]
what are the exemptions and relief available on death only
- woodlands relief (owned for 5 years - deferred until the timber is sold)
- quick succession relief (in possession for 5 years from prior death = 100% if in 1 year prior; reduces each year and only 20% if the amount of IHT previously paid is considered)
when does IHT400 need to be used
every case apart from exceptions
What is the duty of Personal Representatives (PRs) regarding IHT and HMRC?
PRs must deliver an account to HMRC and pay any IHT due by completing form IHT 400.
