What Are The Inheritance Tax Thresholds For 2023/24?
Inheritance tax (IHT) is commonly collected on a person’s estate when they die but can also be payable during a person’s lifetime on certain trusts and gifts. The rate of IHT currently payable is 40% on death and 20% on lifetime gifts. IHT is payable at a reduced rate on certain assets if a taxpayer leaves 10% or more of the 'net value' to charity of their estate.
How Is IHT Paid?
Funds from the estate of the deceased are used to pay IHT. If there is a will, it is usually the executor who deals with paying any IHT due to HMRC. IHT can be paid from funds within the estate, or from money raised from the sale of estate assets. The deceased may also have a life insurance policy to fund the payment of some or all of the IHT due.
What Are The Current Nil-Rate Bands And Reliefs?
There is a nil-rate band, currently £325,000 below which no IHT is payable. In addition, there is an IHT residence nil-rate band (RNRB) which relates to a main residence passed down to a direct descendent such as children or grandchildren. The RNRB of £175,000 (where available) is in addition to the £325,000 IHT nil-rate band. Further to this, if you’re married or in a civil partnership and your estate is worth less than your threshold, any unused threshold can be added to your partner’s threshold when you die.
There are various reliefs available including for qualifying lifetime transfers and gifts made out of excess income, the first £3,000 worth of gifts each tax year, and gifts between spouses and civil partners.
Following the recent increase in the Bank of England base rate, the late payment interest rate due on taxes including IHT increased to 7% from 31 May 2023. The repayment interest rate increased to 3.5% on the same date.
Contact A Specialist
At Moore (South), our knowledgeable tax team is here to guide you every step of the way. Dealing with inheritance tax can be complex and daunting, Contact our tax team now to see how we can help you.