Inheritance Tax - Gifts

weimo

When I read the HMRC guide I find it a little ambiguous as to how many years you can carry over. It would make sense to me that it is 3k per year with one year carried over. When I read their guide it implies 'I think' only one year + one carried over.

"exemption to the following year"

But obviously my interpretation is somewhat bias.

So I guess my real question is: A 15k cash gift is given in 2008, can the gift allowance of 3k be accrued in one large relief (4 x 3k + 3k additional year), or are you limited to the 3 + 3k suggested on HMRC website? With the proviso that the estate is over the threshold.

weimo

No It couldnt be a loan, as there is no paper work to prove and no repayments made electronically to substantiate.

I had looked at the Charity side, but looked to me unless you had a very large estate is wasn't financially beneficial.

getmore4less

weimo wrote: »

When I read the HMRC guide I find it a little ambiguous as to how many years you can carry over. It would make sense to me that it is 3k per year with one year carried over. When I read their guide it implies 'I think' only one year + one carried over.

"exemption to the following year"

But obviously my interpretation is somewhat bias.

So I guess my real question is: A 15k cash gift is given in 2008, can the gift allowance of 3k be accrued in one large relief (4 x 3k + 3k additional year), or are you limited to the 3 + 3k suggested on HMRC website? With the proviso that the estate is over the threshold.

You apply excemption in the year the gift is made, so thats 3k + the 3k from the year before if it has not been used leaving 9k as a PET over thenext 7 years.

Previous years are gone, if there are no gifts in 2009,2010,2011,2012 then the is nothing to use the £3k exemption in those years.

Making it a loan does not help it then becomes a debt to the estate at the same value so IHT assesment is still due.

SeniorSam

Weimo, you seem to have difficulty understanding.

A gift of £15,000 made in 2008 can be offset by the £3000 allowance for 2008 tax year and if no gift were made in the previous year, then a further £3000 would be allowed for the 2007 tax year. That it. The remaining £9000 will stay as part of the estate for the remainder of 7 years from the date of the gift in 2008.

Should you giver die within 7 years and provided the estate would be subject to IHT at the date of death, then it may be possible to allow some taper relief.

Don't bother to try and work it out unless you need to if the giver dies within the specified time.

Each tax year, £3000 can be gifted that is free from and IHT at the date of death. Some additional gifts of £250 can be made to others each tax year.

I hope this has clarified it for you.

Sam

getmore4less

SeniorSam wrote: »

Weimo, you seem to have difficulty understanding.

A gift of £15,000 made in 2008 can be offset by the £3000 allowance for 2008 tax year and if no gift were made in the previous year, than a further £3000 would be allowed for 2007. That it. The remaining £9000 will stay as part of the estate for the remainder of 7 years from the date of the gift in 2008. Should you giver die within 7 years and provided the estate would be subject to IHT at the date of death, then it may be possible to allow some taper relief.

Don't bother to try and work it out unless you need to if the giver dies within the specified time.

Each tax year, £30000 can be gifted that is free from and IHT at the date of death. Some additional gifts of £250 can be made to others each tax year.

I hope this has clarified it for you.

Sam

No taper relief on £9k it only applies to gifts that total over the nill rate band(£325k in this case).

weimo

Right so to sumarise the total relief here would be 6k. You can not carry over 3k every year. The gift is treated as a 'whole' amount and cannot be offset with 3k every year.

Therefore its 40% on 9k

As you say getmore4less the taper relief only applies to lump sums over the 325k

I think I have it clear in my mind now.

Thanks - everyone

getmore4less

What other assets are you dealing with, there may be something you missed to reduce the IHT somewhere else.

Property is particularly difficult to value in many cases in the current climate.

It is very easy to overestimate the value of the personal posessions and households goods etc.

alun4

The whole estate (including the excess over £6000 of the gift) will have to be more than £325,000 for you to be concerned. What is the estate value?

weimo

This estate is over the 325 threshold

weimo

The property has been overvalued in my opinion by 10k. But the estate agent advises this is how much similar properties are going for under probate circumstances, even with the work required.

I read horror stories about penalties issued by HMRC for under valuing.

I plan to rent the property out, but will require considerable refurb before that stage. So kind of a double whammy for me.

In terms of reducing value of other assets, the remainder is stocks and cash so their value is absolute.