Final answer:
Lifetime transfers to an individual that exceed the nil-rate band and are not made to an exempt beneficiary are subject to IHT. The nil-rate band is £325,000, and transfers above this may be taxed at 40% unless they are exempt transfers such as PETs. Various reliefs and exemptions may apply, potentially reducing the tax liability.
Step-by-step explanation:
Lifetime transfers to an individual are chargeable with Inheritance Tax (IHT) if they exceed the nil-rate band and are not made to an exempt beneficiary, such as a spouse or charity. IHT is a tax on the estate (the property, money, and possessions) of someone who has died, but some gifts or transfers made during the giver's lifetime may also be subject to this tax if they exceed certain thresholds or are not covered by exemptions.
There's a nil-rate band, which is currently £325,000 in the UK, and if the total value of the lifetime transfers exceeds this amount, then the excess may be subject to IHT at a rate of 40%. However, transfers made more than seven years before the individual's death are typically exempt from IHT—as they are considered 'potentially exempt transfers' or PETs.
Furthermore, thre are various potential reliefs and exemptions that can reduce or eliminate the IHT charge, such as Business Relief or Agricultural Relief on certain assets. It is essential to consider these carefully, as they can significantly impact the amount of tax payable, and to ensure compliance with legal and tax regulations. Consulting with a tax advisor or an attorney might be necessary for detailed planning.