Please enable JavaScript.
Coggle requires JavaScript to display documents.
Chapter 18 - Inheritance tax - Coggle Diagram
Chapter 18 - Inheritance tax
Scope of IHT
When IHT arise? - Lifetime transfers and death estate
Who is liable? - Individuals and trustees
Transfer of value
Diminution in value/loss to donor: Always measure at reduction in donor's wealth, not the amount gain by donee
Exemptions
Apply to lifetime transfer and death: gifts between spouse/civil partner
Apply to lifetime transfer ONLY
Gifts consideration for marriage: 1. first 5,000 per marriage by parent is exempt 2. 2,500 by a lineal ancestor (eg grandparents) or one party of marriage to the other is exempt 3. 1,000 by any other person
Small gift exemption: up to 250, do not apply to gifts exceeding 250 per tax year in total to same donee
Normal expenditure out of income: cash gifts which are habitual and must not result in reduced standard of living of donor is exempt
Annual exemption: 3,000. Can bring forward for only 1 year
Type of lifetime transfer
Potentially exempt transfer: Exempt from IHT when made, but may become chargeable if donor dies within 7 years
Chargeable lifetime transfer: gift to trusts. CLTs are chargeable during lifetime
Calculation of lifetime tax on lifetime transfer
Nil rate band = 325,000 - CLTs in previous 7 yrs
Tax at 20% if trust paid and 20/80 if donor pay
Gross chargeable transfer = gift (after all reliefs and exemptions) + tax (if donor paid) or just gifts if trust paid
PET is completely exempt after 7 yrs, CLT will not incurred further IHT liability after 7 yrs
Death tax: 40% excess of NRB and payable by the donee
Death estate
RNRB is relevant where: 1. deceased person died on or after 6/4/2017. 2. Deceased person owned a main residence 3. The main residence pass to one or more direct descendants
Chargeable death estate rate: 40%
Transfer of NRB: Unused RNRB transferred if second spouse dies on or after 6 April 2017. If first spouse died before 6 April 2017, they are deemed to have RNRB of 150,000
Payment of IHT:
Lifetime transfers: if CLT made between 6 Apr and 30 Sep, tax due 30 April following end of tax year. Otherwise, tax due 6 months from end of transfer
Death tax: 6 months from end of month of death by done