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Exemptions and Reliefs

Not everyone has to pay Inheritance tax. The main exemptions are as follows:

  • Transfers between spouses. These are wholly exempt where
    a) both parties are domiciled in the UK; or
    b) if both parties are domiciled outside the UK; or
    c) if the transferee(the person to whom the gift is made) only is domiciled in the UK
  • Charities. There is no limit on the amount that can be given to charity and gifts to charities are wholly exempt up to any amount provided certain conditions are not breached. We can advise on these
  • Gifts to political parties. Again, there is no limit on the amount which can be given so long as certain conditions are not breached
  • Gifts for national purposes etc. There is a list of 19 bodies and institutions specified in Schedule 3 of the Inheritance Tax Act 1984 and a few examples are set out below.
  • Gifts to any one or more of these bodies are exempt without limit. The National Gallery; The British Museum; any other similar national institution; any library, local authority, government department, university or university college in the United Kingdom
  • Gifts for public benefit. Gifts without limit can be made to bodies not established or conducted for profit such as land which is of outstanding scenic, historic or scientific interest

Reliefs

Both business property and agricultural property receive favourable treatment.

  1. Business Property relief. To qualify, the property must be “relevant business property” and must have been owned by the transferor for the period of two years immediately preceding death. Where death occurs after 10 March 1992, relief is given by reducing the value of the asset by 100%. Prior to 10 March 1992, the relief was 50%. We can advise on “qualifying relevant business property”.
  2. Agricultural Property relief. Agricultural property is defined as “agricultural land or pasture and includes woodland and any buildings used in connection with the intensive rearing of livestock or fish if the woodland or building is occupied with agricultural land or pasture and the occupation is ancillary to that of the agricultural land or pasture; and also includes such cottages, farm buildings and farmhouses, together with the land occupied with them as are of a character appropriate to the property”. Where death occurs after 10 March 1992 relief is given by reducing the value of the property by 100% certain conditions apply. Prior to that date the relief was 50%.
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