Tax
Inheritance tax
When you die your chargeable estate is valued. This is basically the value of property and investments, less any debts, and excluding certain exempt assets (such as assets left to your spouse, charity or approved national causes).
Tax is then levied on any sum in excess of the IHT exemption which is usually amended at each Budget. From 9 October 2007 it has been possible to add the proportion of unused nil-rate band from the first death to the surviving spouse or civil partner's own nil-rate band when they die.
This can effectively double the current allowance where one nil rate band would otherwise have been wasted.
The 2007 Pre Budget Report introduced with immediate effect the concept of a “transferable nil rate band”; strictly speaking - the transfer of the unused proportion of the nil rate band of the first of a married couple or civil partners to die and the application of that unused proportion to the nil rate band in force on the death of the survivor.
'The executors for the estate of the surviving spouse may therefore have use of a combined nil rate band up to a maximum figure of £325,000 per person (2009/10).
‘Potentially exempt transfers’ are gifts that do not give rise to an immediate liability, but which carry an underlying charge to tax that crystallises if the transferor dies within seven years of making the gift. If you survive for the full seven years, no tax is payable. Most lifetime transfers to individuals (not covered by the annual IHT exemptions) are potentially exempt. You should plan to use all of the available exemptions before making this type of gift.
Tax section links:
a guide to tax | income tax | capital gains tax | inheritance tax | self assessment
