What are tax-free transfers for Inheritance Tax purposes

There are many reliefs for IHT purposes. They include:

  1. Business Property Relief – 100% relief for business assets including an interest in a business, a controlling interest comprising unquoted shares including AIM listed shares, and unlisted shares in a private company.
  2. Agricultural Property Relief – 100% relief (occasionally 50%)
  3. A controlling interest in a listed company – 50% relief.
  4. Certain personal assets used in a business – 50% relief.

Additionally, there are other, smaller reliefs that can be claimed:

  • An annual exemption of £3,000. An unused allowance can be carried forward for one year.
  • Small gifts exemption of £250 per person.
  • Gifts on a marriage or civil partnership: £5,000 from a parent, £2,500 from a grandparent, £1,000 others

There is also an exemption for annual gifts made from income. Basically, a gift will not count as a gift for IHT purposes, if you can demonstrate that the donor’s annual income is at a level to make the gifts without affecting their ability to cover their usual monthly costs.

Gifts to an individual within the nil rate band, and with no strings attached, may still be made without any charge to IHT if the donor lives for 7 years after making the gift.

Changes to the taxation of trusts and non-domiciled persons have complicated IHT planning in recent years. If you haven’t considered your options recently we recommend a review. All you need to do is compile a list of your assets, let us have sight of your Will(s) and we can consider changes you might make to reduce your exposure to this tax.

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