Rules about excepted estates: exempt excepted estates
These are estates where there can be no liability to IHT because the gross value of the estate does not exceed £1,000,000 and there is no tax to pay because either spouse or civil partner exemption and/or charity exemption only can be deducted against the assets. No other exemption or relief can be taken into account.
You should note that:
- Where the death is on or after 1 March 2011, an estate can only qualify as an exempt excepted estate where the amount of spouse or civil partner exemption and/or charity exemption is greater than nil, and
- where the death is on or after 1 April 2014, liabilities can only be taken into account in arriving at the net chargeable value of the estate, provided the debt would be allowed as a deduction against the estate under the rules introduced by Finance Act 2013 (IHTM06028).
The circumstances in which spouse or civil partner exemption and charity exemption can be deducted to establish whether the estate qualifies as an excepted estate have been restricted. Spouse or civil partner exemption can only be deducted if both spouses or civil partners have always been domiciled in the United Kingdom. The amount of spouse or civil partner exemption may be restricted where the deceased died in Scotland (IHTM06014). And charity exemption can only be deducted if the gift is an absolute gift to the organisation concerned.
The conditions for these estates are that
- the deceased died on or after 6 April 2004, domiciled in the United Kingdom,
the gross value of the estate, including
- the deceased’s share of any jointly owned assets,
- any ‘specified transfers’, plus
- any specified exempt transfers’
does not exceed £1,000,000, and the net chargeable value of the estate after deduction of allowable liabilities and spouse or civil partner exemption and/or charity exemption only does not exceed the IHT nil rate band (IHTM06011), where (for deaths after 1 September 2006):
- if the estate includes any assets in trust, they are held in a single trust and the gross value does not exceed £150,000 (unless the settled property passes to the spouse or civil partner or charity, when the limit is waived),
- if the estate includes foreign assets, their gross value does not exceed £100,000,
- if there are any ‘specified transfers’ (IHTM06018), their chargeable value does not exceed £150,000,
- the deceased had not made a gift with reservation of benefit, and
- (where the death is before 6 April 2011) a charge does not arise under IHTA1984/S151A-C (IHT charge on an alternatively secured pension fund).