UK Inheritance tax rates and thresholds

May 28th, 2013 by

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Dan Woodruff

Dan Woodruff

Certified Financial Planner & Chartered Wealth Manager at Woodruff Financial Planning
Financial Planning helps you to navigate and anticipate significant life changes. I want to help you to ensure your money is managed wisely to give you the financial security that will fund the future and lifestyle that is important to you.
UK inheritance tax rates

Use this article to calculate your UK inheritance tax rates

This article gives you all you need to know about UK inheritance tax rates and thresholds. This information is for you if you need to get information about how inheritance tax is applied, and has data going back many years.

Key points:

  • Current position
  • Why you need this data – an example
  • Historical UK inheritance tax rates and thresholds

Current UK inheritance tax rates

The current UK inheritance tax rates are as follows:

  • Assets up to £325,000 are taxed at 0%.
  • Married couples and civil partners can use both inheritance tax thresholds on second death, making a total of £650,000.
  • Assets over £325,000 (or £650,000) are taxed at 40%.
  • Certain lifetime chargeable transfers are taxed at 20% at the date of transfer, and 20% on later death.

Why you need this data – an example

You might need to check the rate of inheritance tax if one spouse pre-deceased another. Let’s look at an example:

Anne has just died. Her husband Bill died on 1st May 2005. In Bill’s will he gave £110,000 to his children, and the rest to Anne. Therefore, Bill used £110,000 of his inheritance tax threshold on his death with his gift to his children. His other assets passed to Anne tax free under the UK domiciled spouse exemption. Bill has used £110,000 out of his £275,000 inheritance tax threshold or 40%.

When Anne dies her estate can use her inheritance tax threshold, plus the remainder of Bill’s. Therefore she has the following remaining inheritance tax threshold:

  • Anne’s inheritance tax threshold – £325,000
  • Bill’s inheritance tax threshold – 60% x £325,000 = £195,000
    Bill had used 40% of his inheritance tax threshold. therefore, Anne can use 60% of the current inheritance tax threshold on her death.
  • Total inheritance tax threshold = £520,000

Historical UK inheritance tax rates and thresholds

Find the year you are interested in. The UK inheritance tax threshold is shown as appropriate. Assets up to the inheritance tax threshold are taxed at 0%. Assets over the inheritance tax threshold are usually taxed at 40%.

Date From  Date To  Inheritance tax threshold
6th April 2009 5th April 2015 £325,000
6th April 2008 5th April 2009 £312,000
6th April 2007 5th April 2008 £300,000
6th April 2006 5th April 2007 £285,000
6th April 2005 5th April 2006 £275,000
6th April 2004 5th April 2005 £263,000
6th April 2003 5th April 2004 £255,000
6th April 2002 5th April 2003 £250,000
6th April 2001 5th April 2002 £242,000
6th April 2000 5th April 2001 £234,000

If you need to examine UK inheritance tax rates for previous years, go to the HMRC page on the subject.

What next?

If you have any questions on UK inheritance tax rates, why not contact us? If you are interested in inheritance tax advice, check out our articles below, or our inheritance tax case study.

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