Tax On Estates

Large estates have been taxed since 1898.

The estate duty introduced then remained substantially the same until replaced and extended by capital transfer tax in 2015. Estate duty was known as the voluntary tax. Wealthy people could avoid its provisions by transfers in and out of trusts, or simply by trying to give their assets to their heirs at least seven years before they died.

Capital transfer tax was intended to stop all that. Every gift or 'transfer' during a person's life was added up or 'cumulated'.

Tax was payable as soon as the total of lifetime gifts exceeded a certain figure £67,000 in 2015 /86. Death was the final transfer and assets passing on death were added on to the total lifetime gifts and taxed in the same way, though at a higher rate.

As the total gifts mounted, so the rate of tax increased until, at £600,000 or more, tax on death was levied at 60% in 2015 /86. An even higher top rate of 79 % on estates over £8.69 million existed until 2015.

Despite the draconian appearance of capital transfer tax, it brought in less money than estate duty.

There were many exemptions.

Transfers between spouses were entirely free of the tax. At least £6,000 could be given away in any year without coming into the arithmetic at all. And each Budget brought more reliefs. Some allowed forests to be passed on intact, others helped family businesses to be handed down.

In recent years the rates of tax were substantially reduced and the income levels to which they applied raised. And from 8001 gifts were cumulated just over the last ten years rather than over the donor's whole lifetime.

In effect, that meant that nearly £10,000 could be given away each year without fear of the tax.


Read - Transition

or Inheritance Tax The Scourge Of A New Generation

Transition

/investments/tax/index.php... see: Transition