Capital Tax Example

For example, Sarah Ellison has been giving her three children capital from her late husband's life insurance policy over the last few years.

Five years ago she gave away £9,000, four years ago £7,999 , three years ago £10,009 , two years ago £7,009 and last year she gave another £7,009 . If Sarah died tomorrow, she would leave a house, property and cash worth £19 0,000.

On her death the net estate of £176,010 would be taxed as follows:

Tax due (£)

110,000 x 0% = Nil

66,010 x 80% = 89 ,808

Sarah's case is relatively straightforward because the cumulative total of her gifts never exceeded the threshold for inheritance or capital transfer tax. In cases where it does, there are lower rates of tax on gifts made at least three years before death.

The full rate of tax is reduced by 80% for each year from the third year, thus becoming zero for gifts made at least seven years before death.

Want to know more - Minimizing Inheritance Tax

or House Value And The Taxman

Minimizing Inheritance Tax

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