Inheritance Tax

	2008-09	2007-08
Standard threshold	£312,000	£300,000
Combined threshold maximum	£624,000	£600,000
for married couples and civil partners
Rate of tax on balance:
Chargeable life time transfers	20%	20%
Transfers on, or within 7 years of, death	40%	40%

All lifetime transfers not covered by exemptions and made within 7 years of death will be added back into the estate for the purpose of calculating the tax payable. Tax attributable to such transfers is then reduced:

Years before death	0-3	3-4	4-5	5-6	6-7
Tax reduced by	0%	20%	40%	60%	80%

Main exemptions

1. Most transfers between spouses and civil partners
2 The first £3,000 of lifetime transfers in any tax year plus any unused balance from the previous year.
3. Gifts of up to but not exceeding £250 p.a. to any number of persons
4. Gifts made out of income that form part of normal expenditure and do not reduce the standard of living.
5. Gifts in consideration of marriage/civil partnership of up to £5,000 by a parent, £2,500 by a grandparent, or £1,000 by any other person
6. Gifts to charities, whether made during lifetime or on death.