Gifting Money - Tapering Tax Liability?

AdamC_2

Hi

I was wondering if someone could confirm my understanding...

The value of my estate will make me liable to IHT. If I gift an amount (a fair amount before anyone tells me about weddings etc.), my understanding is that my estate will be liable as follows...

- for the full 40% if I die within 3 years
- 32% if I die in the 4th year
- 24% if I die in the 5th year
- 16% if I die in the 6th year
- 8% if I die before the end of the 7th year.
- 0% if I croak 7 years and one day after the gift was made.

It's important, as I'm being offered an alternative - investing in a fund, but that doesn't benefit from the tapering relief but does protect me from any liability after 7 years. tbh, on my spreadsheet I'm finding it difficult to make a case for the Investment Fund option unless I input hopelessly optimistic likely rates of return.

Thx in Advance

xylophone

http://www.heritagewills.co.uk/AnIHTtaperrelieftrap.htm
http://moneytothemasses.com/inheritance-tax-iht-taper-relief-on-gifts-explained
http://www.hmrc.gov.uk/inheritancetax/how-to-value-estate/gifts.htm#4

CLAPTON

AdamC wrote: »

Hi

I was wondering if someone could confirm my understanding...

The value of my estate will make me liable to IHT. If I gift an amount (a fair amount before anyone tells me about weddings etc.), my understanding is that my estate will be liable as follows...

- for the full 40% if I die within 3 years
- 32% if I die in the 4th year
- 24% if I die in the 5th year
- 16% if I die in the 6th year
- 8% if I die before the end of the 7th year.
- 0% if I croak 7 years and one day after the gift was made.

It's important, as I'm being offered an alternative - investing in a fund, but that doesn't benefit from the tapering relief but does protect me from any liability after 7 years. tbh, on my spreadsheet I'm finding it difficult to make a case for the Investment Fund option unless I input hopelessly optimistic likely rates of return.

Thx in Advance

for the avoidance of doubt; no

the tapering rule applies to gifts in excess of the IHT limit i.e. 325,000

so if you gift less than 325,000 over 7 years then there is NO taper relief should you die.

the reason is that the IHT allowance of 325,000 comes off the gifts first and only then the main estate