Inheritance Tax UK

Inheritance tax UK or inheritance tax in UK is imposed on progeny of the deceased person upon inheritance of property. UK inheritance tax is also imposed on some types of lifetime gifts, which are not exempt from taxation. The people who are domiciles in the United Kingdom might have to pay inheritance tax for assets held in any part of the world. Those people who are non-UK domiciles, however, will only have to pay inheritance tax on those assets that are held within UK. For the purpose of clarity, the UK inheritance tax laws have specified that those people who have stayed in the country for seventeen of the last twenty years will also be considered domiciled in UK.

Rate of inheritance tax in UK is 40% on death transfers and 20% on lifetime transfers that are taxable. No inheritance tax is required to be paid on inherited assets, which have a money value less than £285,000. If the person who makes a lifetime gift dies within seven years of giving that gift, then that gift becomes taxable. The rate of taxation undergoes reductions depending on the time lapse between the death and the time of receiving the gift.

The rates of taxation on the basis of the period of years before death and the rates of tax imposed thereof are as follows:

• More than 6 but not more than 7 - 20%
• More than 5 but not more than 6 - 40%
• More than 4 but not more than 5 - 60%
• More than 3 but not more than 4 - 80%
• Not more than 3 - 100%

The inheritance tax exempts in UK are as follows:

• Lifetime gifts of value £3,000 per donor can be exempt from taxation
• Transfers taking place between domiciled spouses of UK
• Regular normal expenditures which do not curtail the standard of living of the individual
• Gift amounts less than £250
• Gifts made on marriages by grandparents, parents and other people can be exempted from taxation up to certain amounts

While calculating valuations of assets for the purpose of IHT of UK, the open market values are taken into consideration. The inheritance tax UK is charged on the extent to which the value of the estate of the donor is reduced. When tenanted farms and owner occupied agricultural farms are transferred, a complete tax relief is awarded if the land is vacant.