Gift above IHT threshold

Cretec

Question: if I want to send a gift to my sister who lives in the netherlands and the gift is above the IHT threshold are there any tax implications? I expect to live for more than 7 years since I'm in my early thirties.

noh

Do you really mean the gift is greater than the IHT threshold currently £325000 for a single person?
Or do you mean the gift is greater than the annual IHT exemption amount of £3000?

http://www.hmrc.gov.uk/inheritancetax/pass-money-property/exempt-gifts.htm#2

ceeforcat

On the basis that you do indeed live for more than seven years, there are no tax implications for either of you.

magpiecottage

You do not say how much the gift is or what other gifts you have made in the last seven years.

This is quite important.

Certain gifts are able to be made free of IHT anyway. For example £3,000 per year to any one individual, £250 to any number of individual (covers Christmas presents etc.) and certain gifts on marriagel

After that, on death, irrevocable gifts will be added to the estate in the order in which they were given.

Thus, if your estate is currently £350,000 and you give away £50,000 the £50K will still be counted if you die within 7 years - and it will be allocated to the nil-rate band, which means the £25K excess will still be taxed at 40%.

There is a common misconception that the gift will be put at the top in these circumstances and the recipient will get charged the tax but that is not so. It is the rest of the estate.

There is also a common misconception (particularly among financial advisers) arising from the first misunderstanding. That is that the gift will get taper relief (which means the tax on it is discounted if death occurs after three or more years).

Although it DOES get a discount, it is a percentage of the tax due on the gift itself. If HMRC put the gift in the nil-rate band, then the tax on it is, by definition, nil. And any percentage of nil is also nil.

John_Pierpoint

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