Commentary

I1.404 Developments after 1987

IHT, trusts and estates

I1.404 Developments after 1987

I1.404 Developments after 1987

Two years after IHT was introduced FA 1988, s 136 made the short and simple but revolutionary change in relation to chargeable transfers after 14 March 1988 of making IHT a two rate tax: a nil rate band, of £110,000 in 1988–89 and £128,000 by 1990–91, and a flat rate of 40% thereafter. Since 6 April 2009, the nil rate band has been set at £325,000. Tax on dispositions chargeable on death above the nil rate band remains at 40%1.

Another short and simple, but revolutionary, change was the introduction by F(No 2)A 19922 of a higher rate of business and agricultural relief of 100% (and a lower rate of 50%). This meant that assets such as businesses, partnership shares, voting unquoted shareholdings with more than 25% of the votes, and vacant possession agricultural land could in effect be wholly exempt from inheritance tax3. 100% relief was subsequently extended to agricultural property let on tenancies commencing after 30 August 19954, and, with effect from 6 April 1996, to holdings of unquoted shares with no votes or 25% or less of the votes5.

IHT changes since its introduction largely reflect the political views of the party in power. The above changes were part of a gradual chipping away at IHT by the Conservative government during their period of office from 1979 to 1997, as part of a general policy of reducing tax levels. The introduction of a maximum rate of 40% for IHT followed the reduction of the highest

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