- Last Updated: 17 September 2020
What are the current rates and allowances for Inheritance tax?
To 2020/21 | To 2008/09 | |
Nil-rate band** | £325,000 | 312,000 |
Lifetime rate | 20% | 20% |
Death rate | 40% | 40% |
Death rate where 10% or more left to charity | 36% (from 2014/15) | |
*Increased by any unused portion of a deceased spouse or civil partner's nil rate band **From April 2017 a new additional nil rate band will be available to cover the family home. This will be phased in, beginning at £100,000 per individual and increasing by £25,000 each year until it reaches £175,000 in 2020/21. See Main Residence Nil Rate Band. |
Tax is payable within 6 months of the end of the month of death, e.g. a death in December 2019 will mean the IHT must be paid by 30 June 2020.
See: Estate planning checklist
What's new?
Rates & Allowances
- The Residence Nil Rate Band increases to £175,000 from April 2020, this measure was announced in 2017 and is part of the transitional introduction of the relief.
See IHT: Residence Nil Rate Band.
Offshore trusts and settlors
- Finance Act 2020 amends the legislation in respect of offshore trusts, property added to trusts by UK-domiciled or deemed domiciled individuals is no longer excluded property for IHT. See Non-domicile status, deemed domicile & tax and Non-resident trusts
Non-domiciled individuals
A non-UK domiciled individual is exempt from IHT on non-UK assets, unless a spousal election has been made.
- An individual who has become UK-domiciled and is resident in the UK for the three years before death is also treated as UK-domiciled on death.
- The estate of a foreign domiciliary is excepted, which means that there are no IHT reporting requirements to HMRC, provided they died abroad, they have never held a UK domicile and the UK assets in their estate, passing by will or survivorship, are shares or cash with a death value of less than £150,000.
- See Non-domicile status & tax and IHT: Gifts
Spouses and civil partners
Lifetime and death transfers between UK domiciled spouses/civil partners are exempt from IHT. Any unused nil-rate band of the first spouse to die may be carried forward and added to that of the second spouse. See Transferable Nil rate band.
See IHT: Gifts
Charitable donations
If a donation of at least 10% of the net value of the estate is made to charity the IHT rate decreases to 36%. The charity concerned will receive more if a donor is able to donate under the Gift Aid scheme whilst alive because the charity will be able to receive a basic rate tax credit. See IHT discount on charitable donations.
Business property reliefs
Exemptions | |
Business property: a business, an interest in a business, a controlling interest of unquoted shares (inc. AIM shares) and unlisted shares (private company shares) | 100% |
Agricultural property | 100% |
A controlling interest in a listed company | 50% |
Assets used by the transferor's company or ex-partnership, assets held in a trust of which the deceased was a beneficiary and used in his business | 50% |
* Relevant business property owned for at least two years prior to transfer/death.
For further details see: the Private Client sectionand IHT: Business Property Relief.
Exempt gifts
Certain gifts are exempt from IHT including those within the £3,000 annual exemption, small gifts (£250 per person) and certain gifts on marriage.
See IHT: Gifts
Potentially exempt transfers
Other gifts are taxable if the transferor dies within seven years of making the gift with a reduced charge (taper relief) if they survive at least three years.
See IHT: Gifts