Inheritance Tax (IHT) - Rates

NIL Rate Band

Increases in the nil rate band from 6 April 2008 until 2011 were announced in Budgets 2006 and 2007. For tax year 2009/10 the inheritance tax (IHT) nil rate band has been increased from £312,000 to £325,000. The threshold is to be increased to £350,000 in 2010/11. The Chancellor estimated that only 2% of estates will be subject to IHT in 2009/10 (compared with 5% in 2008/09).

Which means that...

For a person with assets of £325,000 or more the increase in the level of the nil rate band in 2009/10 will produce an increased IHT saving of £5,200. Coupled with the transferable nil rate for a married couple or registered civil partners this can mean that (at current levels of the nil rate band) up to £650,000 of the combined estate could pass free of the IHT.

Taper Relief

Taper Relief is available for use to help reduce the full IHT payable on Potentially Exempt Transfers (PETs), where the gift was made within seven years of death, and where the PET exceeds the IHT nil-rate band applicable at death.

Taper Relief can also be used to reduce the imposition of IHT death rates on those Lifetime Chargeable Transfers that have occurred within seven years of death (but can never be used to reduce any lifetime rate IHT already paid).

There is an interplay between PETs and Lifetime Chargeable Transfers made within seven years of death. Professional advice should be sought here.

Years between Gift and Death	Percentage of Full Charge payable
3 to 4	80%
4 to 5	60%
5 to 6	40%
6 to 7	20%

Important Notice

The information given about tax relief and bases is based on current legislation which, you will appreciate, may change. You will also appreciate that the value of any tax relief will depend upon your particular circumstances