Inheritance Tax

Inheritance Tax

Inheritance Tax is due on many estates in the UK. However, in 2012-2013 the inheritance tax
boundary was raised to £325,000 so most estates are now exempt from paying the tax. The
value of the estate is the value of all property including stocks, shares, gifts and trust funds.
For estates over £325,000 tax is payable at 40% on the amount over the threshold or 36% if
there is a charitable donation made, making the estate a reduced estate. 

How Can I Increase May Inheritance Tax Threshold? 

Married couples and civil partners are in a position where they can increase their Inheritance
Tax threshold by combining their threshold. This works in that when one partner passes away they
can transfer their unused tax threshold (the nil rate band) over to their partner. This can
increase the total boundary for the remaining partner to £650,000. Whilst a spouse is
living they can gift as many of their assets as they wish to their spouse without being charged
any inheritance tax. This is known as 'spouse or civil partner exemption.' Therefore a partner
can pass over all their assets to their spouse whilst they are living to completely prevent their
0% inheritance tax threshold being used.

The rate can only be transferred on the death of the second partner, this second death must have
occurred on or after October 2007. The full nil rate band may not be transferrable if the first
spouse died before 1975. Whenever the first spouse died this should not affect the ability to
transfer some of the tax threshold. 

To make the claim the executor of the Will of the second spouse must firstly work out the
percentage of the threshold you can transfer. 100 per cent of the threshold can be transferred if
the entire estate was left to the surviving spouse as none of the threshold will have been used.
If the deceased made gifts to people during their lifetime, which were subject to inheritance
tax, this will have to be taken away from the threshold before it being transferred. You will
then need to get together the Will and all paperwork from the previous death, then fill in an
IHT217 and an IHT205/C5 if the full threshold can be transferred or an IHT402 if less than 100
per cent of the threshold can be transferred.

Who Is Responsible For Paying Inheritance Tax?

Inheritance tax is generally the responsibility of the executor of the Will and it must be paid
within 6 months of the individual's passing.

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