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Transferable Nil Rate Band

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Every person has their own nil rate band (NRB). This is the amount that can be distributed on their death without inheritance tax being payable. Since 9th October 2007, an unused NRB from a deceased spouse can also be claimed when the surviving spouse dies. There are a number of misconceptions about the transferable NRB that we wish to make clear. How much is available to be transferred? The amount available to be transferred is calculated on the basis of what percentage was used. That percentage is then applied to the value of the NRB at the date of second death. For example, Bob died in August 2006 when the NRB was £263,000. He left £65,750 worth of assets to his daughter and everything else to his wife Ann. 25% of his NRB would be used on his death to cover the assets passing to his daughter, leaving 75% available…

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Transferring and Tapering the Residential Nil Rate Band

Residential Nil Rate Band – Qualifying Residential Interest

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Residential Nil Rate Band – Qualifying Residential Interest The rules for the Residential Nil Rate Band (RNRB) introduce a variety of new terms that need defining. The first of these is a Qualifying Residential Interest. The new S8H Inheritance Tax Act 1984 defines a Qualifying Residential Interest (QRI) as an interest in a dwelling which has been the deceased’s residence at some time during his period of owning the property. This includes a property’s garden or grounds. Residence itself is not defined in the Act. In the majority of cases it will likely be clear whether a property is a person’s residence (as the majority of people will only own one property, their main residence). For when it is not, it is assumed that Capital Gain Tax case law will be relevant in this area. The property doesn’t have to be a main home and there is no minimum ownership…

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Potentially Exempt Transfers (PETs)

By | Inheritance, Wills | No Comments

Section 3A of the Inheritance Tax Act 1984 provides provisions specifically for Potentially Exempt Transfers (PETs). A PET is a transfer of value which is made during the lifetime of an individual; in other words, it is a gift of an asset and provided certain conditions are met, the PET can be exempt from IHT. The conditions which must be met are: The individual must have made the transfer on or after 18th March 1986. It must be a gift to another individual or to a specified trust. No benefit from the transfer must be retained. Individual must survive 7 years for the full value of the asset to fall completely out of the Estate for tax purposes. Where the death occurs after 3 years following when the transfer was made, taper relief applies and has the effect of reducing the tax liability on the transfer rather than the full…

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