IHT - Thresholds and Interest |
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| This is one of a number of explanatory articles, part of a set copied under licence from H M Revenue & Customs website: |
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- Introduction – Is Inheritance Tax due?
- Calculating Inheritance Tax;
- Valuing assets;
- Responsibilities of personal representatives;
- Business relief and businesses;
- Discretionary trusts;
- Deceased left no will;
- Pensions;
- Agricultural relief;
- Deceased's liabilities;
- Foreign aspects;
- Joint property;
- Penalties;
- Settled property;
- Woodlands;
- Probate;
- Alter Inheritance tax;
- Gifts;
- Excepted estates;
- Paying IHT;
- Thresholds and Interest.
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| Introduction |
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| This guide is designed to help our customers to obtain a grant of representation, complete an account of the deceased's estate, and pay any inheritance tax (IHT) which may be due. |
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| It also gives advice about lifetime gifts and the taxation of discretionary trusts. |
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| The proposals in the Finance Bill 2006 affect the meaning in this article regarding: |
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- Gifts into certain kinds of trusts;
- The tax treatment of trusts, known as interest in possession trusts, in which the beneficiaries have a right to benefits;
- The ending of an interest in possession during a beneficiary's lifetime;
- The treatment of funds in alternatively secured pensions on death.
- This article will be updated as necessary when the Finance Bill is enacted.
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| What is the threshold for inheritance tax? |
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| The inheritance tax threshold is the amount above which inheritance tax becomes payable. If the estate, including any assets held in trust and gifts made within seven years of death, is less than the threshold, no inheritance tax will be due on it. |
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| The table below shows the different thresholds in use for deaths between 15 March 1998 and the present date. |
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| From |
To |
Threshold |
| 15.03.1988 |
05.04.1989 |
£110,000 |
| 06.04.1989 |
05.04.1990 |
£118,000 |
| 06.04.1990 |
05.04.1991 |
£128,000 |
| 06.04.1991 |
05.04.1992 |
£140,000 |
| 10.03.1992 |
05.04.1995 |
£150,000 |
| 06.04.1995 |
05.04.1996 |
£154,000 |
| 06.04.1996 |
05.04.1997 |
£200,000 |
| 06.04.1997 |
05.04.1998 |
£215,000 |
| 06.04.1998 |
05.04.1999 |
£223,000 |
| 06.04.1999 |
05.04.2000 |
£231,000 |
| 06.04.2000 |
05.04.2001 |
£234,000 |
| 06.04.2001 |
05.04.2002 |
£242,000 |
| 06.04.2002 |
05.04.2003 |
£250,000 |
| 06.04.2003 |
05.04.2004 |
£255,000 |
| 06.04.2004 |
05.04.2005 |
£263,000 |
| 06.04.2005 |
05.04.2006 |
£275,000 |
| 06.04.2006 |
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£285,000 |
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| For transfers on death, the value of an estate above the threshold is taxed at the rate of 40%. For lifetime transfers the rate is 20%. |
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| What is the excepted estate limit? |
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| For an estate to qualify as an excepted estate, the value of that estate must be below the excepted estate limit. Other rules also apply and you can read more on excepted estates for deaths after 5 April 2004 in our Customer Guide. |
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| The table below gives the excepted estate limits for deaths from 1 April 1987 to the present date. |
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| From |
To |
Limit |
| 01.04.1987 |
31.03.1989 |
£70,000 |
| 01.04.1989 |
31.03.1990 |
£100,000 |
| 01.04.1990 |
31.03.1991 |
£115,000 |
| 01.04.1991 |
05.04.1995 |
£125,000 |
| 06.04.1995 |
05.04.1996 |
£145,000 |
| 06.04.1996 |
05.04.1998 |
£180,000 |
| 06.04.1998 |
05.04.2000 |
£200,000 |
| 06.04.2000 |
05.04.2002 |
£210,000 |
| 06.04.2002 |
05.04.2003 |
£220,000 |
| 06.04.2003 |
05.04.2000 |
£240,000 |
| 06.04.2004 |
present |
IHT threshold* |
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| Note: * If the death is after 5 April but before 6 August in any one tax year and the grant of representation is applied for before 6 August that year, the threshold which applies for an excepted estate is the one from the tax year before that in which the deceased dies. |
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| If the death is between 6 August and 5 April in any one tax year, the threshold to use for an excepted estate is the IHT threshold that applies at the date of death. |
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| What is the due date for the payment of the inheritance tax? |
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| Inheritance tax is due six months after the end of the month in which the death occurred. We call this the due date. Interest begins to be payable from the day after the due date if the tax has not been paid. |
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| The table below shows the due dates for inheritance tax and also the date that interest starts. |
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| Month of death |
Due date |
Interest starts from |
| January |
31 July |
1 August |
| February |
31 August |
1 September |
| March |
30 September |
1 October |
| April |
31 October |
1 November |
| May |
30 November |
1 December |
| June |
31 December |
1 January |
| July |
31 January |
1 February |
| August |
28/29 February |
1 March |
| September |
31 March |
1 April |
| October |
30 April |
1 May |
| November |
31 May |
1 June |
| December |
30 June |
1 July |
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| What is the interest rate for inheritance tax? |
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| The interest rate is the same for both late payments of inheritance tax and over payments. So, the interest charged on a late payment is the same as the interest added by us to a repayment of over paid tax. The table below show the rates of interest from 6 October 1994 to the present date. |
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| Interest period |
No of days |
Interest rate (%) |
| 6.10.94 to 5.03.99 |
1612 |
5 |
| 6.03.99 to 5.02.00 |
337 |
4 |
| 6.02.00 to 5.05.01 |
455 |
5 |
| 6.05.01 to 5.11.01 |
184 |
4 |
| 6.11.01 to 5.08.03 |
638 |
3 |
| 6.08.03 to 5.12.03 |
122 |
2 |
| 6.12.03 to 5.09.04 |
275 |
3 |
| 6.09.04 to 5.09.05 |
365 |
4 |
| 6.09.05 to |
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3 |
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