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  • FIRST POST
    • Jon12345
    • By Jon12345 20th Mar 17, 4:29 PM
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    Jon12345
    Gifts to avoid Inheritance Tax
    • #1
    • 20th Mar 17, 4:29 PM
    Gifts to avoid Inheritance Tax 20th Mar 17 at 4:29 PM
    I have heard that parents can gift £3K per year without worrying about inheritance tax. Is this correct?

    Got two elderly parents with money in the bank and we are looking at how to reduce any exposure to tax. I've heard about a 7 year rule but not sure if that applies to the £3K gifting per year?

    Thanks,

    Jon
Page 1
    • xylophone
    • By xylophone 20th Mar 17, 4:40 PM
    • 22,396 Posts
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    xylophone
    • #2
    • 20th Mar 17, 4:40 PM
    • #2
    • 20th Mar 17, 4:40 PM
    http://webarchive.nationalarchives.gov.uk/20060213211319/inlandrevenue.gov.uk/leaflets/iht2.pdf

    Archive but see page 7 and 8.

    https://www.gov.uk/inheritance-tax/gifts (latest version).
    • Credit-Crunched
    • By Credit-Crunched 20th Mar 17, 6:18 PM
    • 2,066 Posts
    • 4,069 Thanks
    Credit-Crunched
    • #3
    • 20th Mar 17, 6:18 PM
    • #3
    • 20th Mar 17, 6:18 PM
    Each person can give £3,000 per year away without question as an annual exemption amount. These do not form part of the 7 year rule as they are not classes as Potentially Exempt Transfers.
    • Jon12345
    • By Jon12345 20th Mar 17, 7:22 PM
    • 83 Posts
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    Jon12345
    • #4
    • 20th Mar 17, 7:22 PM
    • #4
    • 20th Mar 17, 7:22 PM
    That's good to know, thanks. In order for my parents to do this, do they just put it on their tax return or something? Or do they need some other kind of evidence?

    My understanding is you can go back and use the previous years allowance if you didn't use it. Does that mean I can do £12K? i.e. 2 parents, 2 years.
    • kidmugsy
    • By kidmugsy 20th Mar 17, 8:13 PM
    • 9,471 Posts
    • 6,245 Thanks
    kidmugsy
    • #5
    • 20th Mar 17, 8:13 PM
    • #5
    • 20th Mar 17, 8:13 PM
    That's good to know, thanks. In order for my parents to do this, do they just put it on their tax return or something? Or do they need some other kind of evidence?

    My understanding is you can go back and use the previous years allowance if you didn't use it. Does that mean I can do £12K? i.e. 2 parents, 2 years.
    Originally posted by Jon12345
    £12k: yes.

    Evidence: all we've done is written letters to the recipients of the gifts, told them to keep the letters safe, and put copies on file. HMRC has no interest in knowing until the gifter's death.

    P.S. After an enquiry, we also wrote a letter to a bank assuring them that the money was a gift and not a loan. If the cash went towards a property purchase, we said, we had no claim on the property. They were happy with that.
    Last edited by kidmugsy; 20-03-2017 at 8:16 PM. Reason: P.S.
    • Keep pedalling
    • By Keep pedalling 20th Mar 17, 10:42 PM
    • 3,446 Posts
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    Keep pedalling
    • #6
    • 20th Mar 17, 10:42 PM
    • #6
    • 20th Mar 17, 10:42 PM
    Do your parent have a estate over £850K? This is the joint nil rate band from the 6th April (rising to £1M by April 2020) and if not they really don't need to worry about the allowance or records.

    If their estate is in 7 figures then they should be looking at larger gifts and just keep breathing for the next 7 years.
    • Credit-Crunched
    • By Credit-Crunched 21st Mar 17, 4:12 PM
    • 2,066 Posts
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    Credit-Crunched
    • #7
    • 21st Mar 17, 4:12 PM
    • #7
    • 21st Mar 17, 4:12 PM
    Do your parent have a estate over £850K? This is the joint nil rate band from the 6th April (rising to £1M by April 2020) and if not they really don't need to worry about the allowance or records.

    If their estate is in 7 figures then they should be looking at larger gifts and just keep breathing for the next 7 years.
    Originally posted by Keep pedalling
    This is not correct, the nil rate band is still £325,000 (sole) with a rising residence nil rate band.

    The threshold is to increase again to £125,000 in the following 2018/19 tax year, £150,000 in 2019/20 and to £175,000 in 2020/21.

    So you will only have this is your estate is made up primarily of a main residence.

    The second piece of advice is also incorrect, they will need to worry about records if they make these gifts prior to the rise.
    • Keep pedalling
    • By Keep pedalling 21st Mar 17, 7:42 PM
    • 3,446 Posts
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    Keep pedalling
    • #8
    • 21st Mar 17, 7:42 PM
    • #8
    • 21st Mar 17, 7:42 PM
    This is not correct, the nil rate band is still £325,000 (sole) with a rising residence nil rate band.

    The threshold is to increase again to £125,000 in the following 2018/19 tax year, £150,000 in 2019/20 and to £175,000 in 2020/21.

    So you will only have this is your estate is made up primarily of a main residence.

    The second piece of advice is also incorrect, they will need to worry about records if they make these gifts prior to the rise.
    Originally posted by Credit-Crunched
    From April 6th a couple will have a total allowance of £850k between them and all of it can be used as long as the main residence is worth at least £200k so they do not have to have an estate mainly made up of a property.

    A couple with an estate under that size, including gifts over £3k made in the last 7 year, and with the first to die planning leave the bulk of their estate to the surviving spouse does not really need to worry about IHT, as long as they survive the rest of this month.

    I will stand corrected on the records, best to keep them anyway to make life simpler for your executo.
    • vvconfused
    • By vvconfused 3rd May 17, 3:52 PM
    • 13 Posts
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    vvconfused
    • #9
    • 3rd May 17, 3:52 PM
    main residence iht allowance
    • #9
    • 3rd May 17, 3:52 PM
    Re the £100,000 iht main residence allowance introduced in April 2017: we have been married 42 years, the house belonged to my husband prior to marriage and remains owned solely by him. Should I die first, as the house would not be part of my estate, would I lose out on this new allowance?
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