Inheritance tax is normally payable upon the death of an individual, but can also be due during the lifetime of an individual when they make a chargeable lifetime transfer.
However there are a number of lifetime gifts that can be made free of IHT, including:
- Small gifts of up to £250 per person
- A number of gifts made in consideration of marriage:
- £5,000 from the parent of a party to a marriage/civil partnership
- £2,500 from a remote ancestor of a part to a marriage/civil partnership
- £2,500 from a party of the marriage/civil partnership
- Each individual has an annual exemption from IHT for the first £3,000 of gifts made per annum
- If you have not used the previous year’s annual exemption, this can also be carried forward for one year, so that total annual exemptions of £6,000 are available
In addition to the above, individuals also have a nil rate band, which is a limit up to which IHT is not payable. The limit for the 2014-2015 tax year is £325,000.
Finally, in some situations, relief is available which can reduce the inheritance tax charge down to as low as 0%. This generally falls under business property relief and agricultural property relief.
The rules on IHT are complex; therefore taking professional advice is always advisable.
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