The following Trusts and Inheritance Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:
Inheritance tax is charged at the rate of 40% on estates at death or at half that rate, 20%, on chargeable lifetime transfers. The NRB is an important relief which assigns a rate of 0% to the lower portion of an estate or transfer.
Generally, inheritance tax only becomes payable if the chargeable transfer exceeds the NRB in force at the time the transfer is made. In order to determine whether a transfer exceeds the NRB, it is added to the transferor’s previous chargeable transfers in the preceding seven years. This is known as the cumulation principle.
See Example 1.
The NRB is currently £325,000. This threshold has applied from 6 April 2009 and it is intended to remain at that level until 5 April 2021.
Thresholds in previous years can be found at inheritance tax thresholds and interest rates.
Each individual is entitled to an NRB. An estate on death may also qualify for some or all of the unused NRB of the spouse or civil partner (see below). With effect from 5 April 2017, an extension to the NRB applies where residential property is gifted to lineal descendants. Rules for the application of the residence nil rate band (RNRB) are described separately in the Residence nil rate band ― main provisions guidance note.
For more information on the operation of the NRB in calculations, see the following guidance notes:
Chargeable lifetime transfers
Charge on death
Application of NRB and transferable NRB
If the deceased died on or after 9 October 2007, and their spouse or civil partner (referred to as the ‘spouse’ or ‘widow(er)’ throughout this note for simplicity) died before them without using all of their NRB available at the date of death, then a proportion equivalent to the unused percentage can be transferred for use on the survivor’s death. It can be set against ‘the charge to tax on the death of the survivor’ and so includes
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