Section 8: Inheritance Tax: Rates and Rate Bands
Summary
1.Section 8 provides for the limit of the inheritance tax nil rate band to be set at £325,000 for the tax years 2010-11 to 2014-15 inclusive and maintains the tax rate at 40 per cent for chargeable amounts in excess of this tax-free amount.
Details of the Section
2.Subsection (1) provides that the table of rates of tax in Schedule 1 to the Inheritance Tax Act 1984 substituted by section 155(1)(b) and (4) of the Finance Act (FA) 2006 has effect for the tax year commencing 6 April 2010.
3.Subsection (2) provides that section 4 of FA 2007 and the table of rates substituted by it will be omitted.
4.Subsection (3) provides that section 8 of the Inheritance Act 1984 does not have effect to substitute a new table of rates of tax where the retail prices index is higher for the month of September in 2010, 2011, 2012 or 2013 and the previous September.
Background Note
5.Where the Retail Prices Index (RPI) for the month of September is higher than it was for the previous September, then, unless Parliament otherwise determines, the limit of the inheritance tax nil rate band increases from the 6 April of the following year by the same percentage as the percentage increase in the RPI.
6.Section 155(1)(b) and (4) of FA 2006 provided for the limit of the inheritance tax nil rate band to be set at £325,000 for the tax year 2009-10.
7.Section 4 of FA 2007 previously provided for the limit of the inheritance tax nil rate band to be set at £350,000 for the tax year 2010-11.
8.The RPI for September 2009 was not higher than that for September 2008. This section sets the nil rate band for the tax year 2010-11 at £325,000 and disapplies indexation for tax years 2011-12 to 2014-15 inclusive.