Inheritance tax and key dates to consider

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Inheritance tax is charged on a transfer of value, which reduces the overall value of a person’s estate. Inheritance tax is not payable in all estates and if there is a charge, the following exemptions will be applied in calculating the amount of IHT due:

Ni Rate Band (NRB)

Each individual has a Nil Rate Band (tax free exemption), which is currently set at £325,000. This is the sum a person can transfer without payment of inheritance tax. Any gifts made within this amount in a 7-year period is taxed at 0 percent.

Transferable Nil Rate Band (TNRB)

This exemption is only available if an individual was married or in a civil partnership. The Nil Rate Band not used on the death of a spouse/civil partner can be transferred on the surviving spouse/civil partner’s death, regardless of when the first death occurred. This exemption is not automatically given and must be claimed on the survivor’s death. By claiming the Transferable Nil Rate Band, this can greatly reduce any IHT that would otherwise have to be paid.

Residence Nil Rate Band (RNRB)

This is an enhancement to the Nil Rate Band and can dramatically reduce the chargeable value of the IHT estate. The RNRB can only be claimed if the deceased’s residence is closely inherited, such as a child or grandchild.
Claiming the RNRB is subject to the net value of the deceased’s estate not exceeding the taper threshold, currently set at £2 million. If the value of the estate exceeds £2 million, the RNRB amount is withdrawn by £1 for every £2 that the value of the estate exceeds the taper threshold.

Key dates to consider

An inheritance tax account must be filed within 6 months of the date of death, even if there is no tax payable. If inheritance tax is payable, interest starts accruing the first day of the seventh month after the date of death.
Failure to file an inheritance tax account within 6 months can result in penalties from HM Revenue and Customs.

The Transferable Nil Rate Band and Transferable Residence Nil Rate Band is not automatically given and must be claimed. This must be claimed within two years of the surviving spouse/civil partner’s death. The IHT forms must be sent to HM Revenue and Customs no later than 24 months after the end of the month in which the surviving spouse died. For example, if the surviving spouse/civil partner died on 13 May 2022, the IHT forms would need to be submitted to HM Revenue and Customs by 31 May 2024. Failure to submit the TNRB and TRNRB forms to HM Revenue and Custom within this time will result in the loss of the Transferable Nil Rate Band and Transferable Residence Nil Rate Band. This can have a huge financial impact on the estate.

If you have any questions about the inheritance tax or would like to speak to a Probate Solicitor, please call us on 01279 295047 or complete our enquiry form and we will be in touch.

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