DEFINITION of Capital Transfer Tax

A capital transfer tax is an inheritance tax levied in the United Kingdom on estates exceeding a certain value. In 1975, the capital transfer tax replaced the general estate duty, and in 1986, was replaced by the Inheritance Tax (IHT) for deaths. The amount of tax was derived from the value of the deceased's assets (both real estate and personal) transferred within a certain time of death, less charitable gifts.

BREAKING DOWN Capital Transfer Tax

The capital transfer tax was introduced in 1974, although it did not apply on death until 1975. Following the Finance Act of 1986, the Capital Transfer Tax Act of 1984 was renamed the Inheritance Tax Act of 1984. It was imposed on the total value of gifts and property transferred during a donor’s lifetime or after his or her death. HM Revenue and Customs (HMRC) provides the prevailing capital transfer tax rate for the years during which this estate tax was active for both gifts made inter vivos and transfers made upon death.

Capital Transfer Tax on Transfers on Death (in pounds, £)

Tax Rate

13 Mar 1975 to 26 Oct 1977

27 Oct 1977 to 25 Mar 1980

26 Mar 1980 to 8 Mar 1982

9 Mar 1982 to 14 Mar 1983

15 Mar 1983 to 12 Mar 1984

13 Mar 1984 to 5 Apr 1985

6 Apr 1985 to 17 Mar 1986

10%

15,000

25,000

-

-

-

-

-

15%

20,000

30,000

-

-

-

-

-

20%

25,000

35,000

-

-

-

-

-

25%

30,000

40,000

-

-

-

-

-

30%

40,000

50,000

50,000

55,000

60,000

64,000

67,000

35%

50,000

60,000

60,000

75,000

80,000

85,000

89,000

40%

60,000

70,000

70,000

100,000

110,000

116,000

122,000

45%

80,000

90,000

90,000

130,000

140,000

148,000

155,000

50%

100,000

110,000

110,000

165,000

175,000

185,000

194,000

55%

120,000

130,000

130,000

200,000

220,000

232,000

243,000

60%

150,000

160,000

160,000

250,000

270,000

285,000

299,000

65%

500,000

510,000

510,000

650,000

700,000

-

-

70%

1,000,000

1,010,000

1,010,000

1,250,000

1,325,000

-

-

75%

2,000,000

2,010,000

2,010,000

2,500,000

2,650,000

-

-
Capital Transfer Tax on Lifetime Transfers (in pounds, £)

Tax Rate

27 Mar 1974 to 26 Oct 1977

27 Oct 1977 to 25 Mar 1980

26 Mar 1980 to 9 Mar 1981

10 Mar 1981 to 8 Mar 1982

9 Mar 1982 to 14 Mar 1983

15 Mar 1983 to 12 Mar 1984

13 Mar 1984 to 5 Apr 1985

6 Apr 1985 to 17 Mar 1986

5%

15,000

25,000

-

-

-

-

-

-

7.50%

20,000

30,000

-

-

-

-

-

-

10%

25,000

35,000

-

-

-

-

-

-

12.5%

30,000

40,000

-

-

-

-

-

-

15%

40,000

50,000

50,000

50,000

55,000

60,000

64,000

67,000

17.50%

50,000

60,000

60,000

60,000

75,000

80,000

85,000

89,000

20%

60,000

70,000

70,000

70,000

100,000

110,000

116,000

122,000

22.5%

80,000

90,000

90,000

90,000

130,000

140,000

148,000

155,000

25%

-

-

-

110,000

165,000

175,000

185,000

194,000

27.50%

100,000

110,000

110,000

-

-

-

232,000

243,000

30%

-

-

-

130,000

200,000

220,000

285,000

299,000

35%

120,000

130,000

130,000

160,000

250,000

270,000

-

-

40%

-

-

-

510,000

650,000

700,000

-

-

42.5%

150,000

160,000

160,000

-

-

-

-

-

45%

-

-

-

1,010,000

1,250,000

1,325,000

-

-

50%

200,000

210,000

210,000

2,010,000

2,500,000

2,650,000

-

-

55%

250,000

260,000

260,000

-

-

-

-

-

60%

300,000

310,000

310,000

-

-

-

-

-

65%

500,000

510,000

510,000

-

-

-

-

-

70%

1,000,000

1,010,000

1,010,000

-

-

-

-

-

75%

2,000,000

2,010,000

2,010,000

-

-

-

-

-

Capital transfer taxes and other inheritance taxes make up a small portion of taxes collected in the United Kingdom. This is partially due to the nil rate band, which is the range of estate values that are excluded from the tax, as well as the various methods for avoiding its payment. Gifting an estate to charities and family members or creating a trust were two tax avoidance methods used.