exemptions

Nil rate band

Everyone has a tax free sum known as the ‘nil rate band’. The present tax free sum is £325,000. The tax free sum used to increase each year but is now frozen until 2017/18 which is not good news. If the value of your estate, on your death, is less than £325,000 there will be no inheritance tax to pay. Generally if the value of your estate exceeds this figure then inheritance tax may be due at 40% unless you leave 10% of your estate to charity in which case a reduced rate of 36% may apply.

In addition, it may be possible to increase the £325,000 figure to £650,000 if you have a late spouse or civil partner who did not use their tax free sum.

Gifts to charities

These gifts are exempt from inheritance tax and should be immediate. If they are conditional the condition must be satisfied within twelve months. The exemption only applies if the gift is to be used exclusively for the purposes of the charity.

Spouse/civil partner exemption

Gifts between spouses and civil partners are also exempt. The inheritance tax legislation does not define ‘spouse’ or ‘civil partner’ but the exemption applies to people who are lawfully married and to people who are registered as civil partners.