Appendix 1: rates of Inheritance Tax
The Valuation Office Agency's (VOA) technical manual relating to Inheritance Tax.
1.1 Transfers on death
Initially the rate of IHT was dependent upon the total value of a person’s estate. Up to a certain amount there was no tax payable and then IHT was charged at an increasing rate on successive slices, until the maximum rate of tax was reached.
However, since 1988 there has only been one rate of IHT for transfers on death and that is 40%. There is no charge to tax if the total value of the estate does not exceed the exemption limit. Tax is charged at 40% on any excess over that limit.
The exemption limit since 1988 has been as follows:-
|From 15 March 1988||£110,000|
|From 6 April 1989||£118,000|
|From 6 April 1990||£128,000|
|From 6 April 1991||£140,000|
|From 6 April 1992||£150,000|
|From 6 April 1995||£154,000|
|From 6 April 1996||£200,000|
|From 6 April 1997||£215,000|
|From 6 April 1998||£223,000|
|From 6 April 1999||£231,000|
|From 6 April 2000||£234,000|
|From 6 April 2001||£242,000|
|From 6 April 2002||£250.000|
|From 6 April 2003||£255,000|
|From 6 April 2004||£263,000|
|From 6 April 2005||£275,000|
|From 6 April 2006||£285,000|
|From 6 April 2007||£300,000|
|From 6 April 2008||£312,000|
|From 6 April 2009||£325,000|
1.2 Transfer of nil rate band
For deaths occurring on or after 9th October 2007, spouses and civil partners can now transfer their nil-rate band allowances so that any part of the nil-rate band that was not used when the first spouse or civil partner died can be transferred to the individual’s surviving spouse or civil partner for use on their death.
Where a valid claim to transfer an unused nil-rate band is made, the nil-rate band that is available when the surviving spouse or civil partner dies will be increased by the proportion of the nil-rate band unused on the first death. For example, if on the first death the chargeable estate is £125,000 and the nil-rate band is £250,000, 50% of the nil-rate band would be unused. If the nil-rate band when the survivor dies is £312,000, then that would be increased by 50% to £468,000
1.3 Immediately chargeable lifetime transfers
When the cumulative total of transfers exceeds the threshold (and exempt transfers and those made more than seven years previously do not count for this purpose), immediately chargeable lifetime transfers are charged at half the death rate.
If death then occurs within 3 years, tax is recalculated at the death rate. If the transfer was more than three years and less than seven before the death, additional tax is calculated on a tapered scale.
1.4 Potentially exempt lifetime transfers
If the transferor survives for seven years no tax is payable. For transfers made within three years tax is payable at the full death rate. For transfers made between three and seven years before death and where tax is payable on lifetime gifts (i.e. the total value of all gifts exceeds the date of death threshold), the tax payable is reduced on a tapered scale.
|Years between gift and death||Percentage of death rates|