Inheritance tax (IHT) is charged on the value (assets less liabilities) of a person’s estate on death. The first £325,000 is exempt (the ‘nil rate band’) and the balance is taxed at 40%.
Inheritance tax planning – any property
• Transfers between spouses/civil partners are exempt, therefore if property is left to the surviving spouse there will be no IHT due on the first death but may be on the second death.
• If a gift of a property is made to a non spouse/civil partner the transfer is termed a ‘potentially exempt’ transfer and will only be chargeable to IHT should the donor not survive seven years.
• If the property is gifted but with conditions attached (‘gift with reservation of benefit’) or was originally the donor’s property (‘pre-owned asset’) the exemption will not apply.
• Property placed within a ‘mainstream’ trust does not form part of the donor’s estate on death and as such reduces any IHT that may become due.
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