Tax on gifts before 7 yr period

dontknowwhatimdoing

Hello! Please could someone help me - I am starting a probate form. I have just found out that the deceased made a gift (non birthday etc.) of £6,000 to my brother 2 yrs ago and £12,000 4 years ago to him and other smaller cash gifts during the last 7 years. Obvious large chunks taken from B/Soc. Will he be due to pay tax on these amounts, and if so, how do I work out how much.
Also, what do I do if he turns nasty and refuses (quite a possibility, sadly). Many thanks, xxxx

Eyesparky

It depends on the size of the estate after these payments have been offset by the £3000 per annum allowance. Try this site for a jumping off point re: allowances etc. http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/InheritanceTaxEstatesAndTrusts/DG_4016736.

If the 2 figures given above were the only gifts for example in the last 7 years, depending on where in the financial year they fell would work out something like this:

7 years ago - £3K allowance unused, rolled forward 1 year (to be used after next years allowance) - unused
6 years ago - £3K allowance unused ,rolled forward 1 year (to be used after next years allowance) - unused
5 years ago - £3K allowance unused, rolled forward 1 year (to be used after next years allowance) - used
4 years ago - £12K Gift - £3K allowance used plus £3K from previous year leaving residual £6K to be counted against IHT
3 years ago - £3K allowance unused, rolled forward 1 year (to be used after next years allowance) - used
2 years ago - £6K Gift - £3K allowance used plus £3K from previous year leaving residual £0 to be counted against IHT
last financial year - £3K allowance unused, rolled forward 1 year (to be used after next years allowance) - unused

It all depends on when the gifts were given in the financial year (April - March). If the overall estate is below the limit (£312K last year, £325 this year) then no tax would be due but if over, with the figures above as example tax @ 40% would be due on £6K. Hope this makes some sense and helps a little.

dontknowwhatimdoing

Thank you for your reply - I am sorry to be so useless but I still do not understand - the estate will come just under the Inheritance Tax cut off point. However, with regard to 'gifts' within the 7 yr period, I have been led to understand if these total more than £3,000 pa to one person then tax would be due.
And who would be liable to pay if this was the case?

dontknowwhatimdoing

Oh help! I did not scroll down enough! Thank you for all the information! I just went on to the link. (Need more water with it I s'pose!) X

Eyesparky

The estate would be liable to pay any taxes if the estate is over the threshold. In the example above £6K would be added to other assets for determining the value of the estate with regards IHT. If the total estate has a value of £280K then the estate would be valued at £286K, would fall below the IHT limit and not be due to pay any IHT. If the gifts, after allowances, pushed the estate over the annual limit then IHT would be due on the amount over the threshold. Note also that the value of the estate governs which forms they want you to fill in, if you are very close to the limit you may end up having to fill in the long form ... not sure of the figures for this year. They do not make it as straight forward as it should be, particularly at a time when people are grieving. Sorry for your loss by the way.

dontknowwhatimdoing

Thank you so much for all your help. Actually it has been hell - it has been 4 weeks since I lost my widowed mum and I have only just started to think about the beastly probate form.
I am scared of not doing it exactly as it should be and have so much to wade through. If I made a mistake (unintentional) would I get onto terrible trouble? Do they check what is written before sending one to prison? I really do not want to call in a solicitor if I can help it. XX
PS Would you know if there is a time limit for probate? How long could I take? xx

Eyesparky

Relax a little and take your time. The only reason I know anything about it is I have recently done the form filling (actually have my probate meeting in the morning). It is important to get all the information as accurate as possible and some of this can take time to compile. I found the guidance booklet that came with the form useful but have to admit to having to read some sections many times and hitting the internet for information where it all became too oblique. It all depends how complicated the estate is, whether there was a will etc. how long it will take. If you are methodical and take your time (I made copies of the form to fill in whilst I worked everything out and a spreadsheet to enter values in as I found them out from banks etc. under the titles from the form ... in my case it took a couple of months to get to an accurate account as some of the information was difficult to come by and I had to trawl 7 years of statements from multiple accounts looking for gifts etc.). After applying I have waited about 6-7 weeks for a meeting which to be honest has been a welcome breather from it all.

Anyway I will find out tomorrow if I have filled in all the forms OK or not and whether my advise is of any use .

dontknowwhatimdoing

Well thank you yet again - I do not feel quite so lonely now! My husband is great and will help, it is just that I know I have a looming problem - although I have not actually read the will yet, I have a strong feeling I will be the sole inheritor due reasons I would rather not divulge. If this IS the case, I am in for a rough ride and I have to admit I am scared.
It is all so sad. Thank you again anyway - good luck tomorrow. XXXX

John_Pierpoint

I too am waiting for my (legal) interview.
You are allowed to put in estimates for those things that you cannot get right first time,
(I've got a house to sell) and then put in the real sale price.
Last time I did it, getting through the security scanner took longer, than holding the bible and swearing that we had not "forgotten" to put everything on the forms.
The Capital Taxes people in Nottingham, when I needed to talk to them on the phone, were very reasonable, the local district valuer (another house) was a tough nut - I still feel a bit cheated - but all in all they are just tax collectors getting on with their job.
Just take your time, you are not alone on here:
http://forums.moneysavingexpert.com/showthread.html?t=1627763

Try to think of it as an adventure and a learning experience.

John.

PS
"I lost my widowed mum........."

Remember to investigate what happened when her husband died. If you can prove he left everything to his wife, you will have two lots of 312K GBP zero rate band for Inheritance Tax purposes. Even if he left part of his estate to other people there could still be a proportion of his zero rate band of 312K available for this the second death.

although I have not actually read the will yet........ How do you know any of this is your "problem"? Go and get it (plus a certified copy or 3, if it is held by a solicitor, so you don't need to risk losing the real thing this side of probate) ASAP.
I had a few institutions that refused to release information to me without seeing a copy of the will even though I have yet to "prove" it.

sloughflint

dontknowwhatimdoing wrote: »

I have just found out that the deceased made a gift (non birthday etc.) of £6,000 to my brother 2 yrs ago and £12,000 4 years ago to him and other smaller cash gifts during the last 7 years. Obvious large chunks taken from B/Soc. Will he be due to pay tax on these amounts, and if so, how do I work out how much.

dontknowwhatimdoing wrote: »

although I have not actually read the will yet, I have a strong feeling I will be the sole inheritor due reasons I would rather not divulge. If this IS the case, I am in for a rough ride and I have to admit I am scared.

Firstly you need to locate the Will and ascertain who the executor(s) is/are.

It is the executors' duty to complete the IHT forms, obtain grant of probate etc

If you do find you are sole beneficiary, please try not to worry too much. Care would have been made to make the Will watertight.

The IHT threshold for the tax year your mother died was £ 312 000. If your father did not leave his estate to his wife then that would be your mother's allowance.

However if your father left a percentage of his estate to your mother, that percentage of the IHT allowance (£312 000) can be added to your mother's allowance giving her a potential maximum allowance of £624 000.Executors would require details regarding your father's estate to uplift his allowance.

From what you have written so far, £6000 from the £12 000 gift seems to be non exempt from IHT and therefore would be added to the value of your mother's estate at date of death.

It would seem that probably no or very little IHT is payable.

If any is payable however, the estate would pay the IHT and not your brother.

Eyesparky

I didn't realise you had not seen the will ... definitely the first thing to do is view the will as others have mentioned and ascertain that you are in fact the executor of the will. I needed the will along with certified copies of the death certificate in order to get any information from banks etc. as they needed to verify that I was named as executor etc. and would be able to deal with the estate in due course when probate is granted.

Meeting was really informal and took less than 10 minutes to make declarations etc. They were very pleasant and helpful and apparently I had filled in the form properly .