Inheritance Tax question

hotcook

My Dad is poorly in hospital. I don't think he is about to die but he thinks he is. He is however very elderly and frail. On Thursday he asked me to write a cheque to myself for £1000 from his bank account which he signed, which he says is to cover a present for my son's recent 16th birthday and travelling and associated expenses for me to continue to visit him in hospital. I am guessing it is also to cover Christmas as he usually gives me a cheque for £300 to buy presents for myself, son, daughter and husband. If he should die soon is this money subject to Inheritance Tax? It comes from his bank account where his pension etc is paid into rather than from any savings. He has been giving money to my brother who lives with him which is fine - it's his money he can do what he likes with it - but I would like to have an understanding of the IHT posistion on these particular payments. I still have the cheque, I haven't paid it in. I feel uncomfortable about it anyway. Any help appreciated.

CLAPTON

What will his estate be?
Is his wife alive : if not what happened to her estate when she died.


Any inheritance tax is paid from the estate.

Mojisola

hotcook wrote: »

but I would like to have an understanding of the IHT posistion on these particular payments.

Your father's estate would have to be over £325,000 before IHT became an issue. If he is able to use the spousal exemption, that amount is doubled.

If IHT has to be paid, it is paid from the estate. It's very rare for the people who received gifts to have to repay any of the money they received.

Keep_pedalling

Your father has an annual gift allowance of £3000 so unless he has made other large gifts in this financial year then this £1000 no longer forms part of his estate so will not be subject to IHT.

If you father's estate is over the IHT threshold, then he should consider giving a little more to maximise his allowance (this assumes he has sufficient liquid assets to be able to afford this). He can also carry forward any unused allowance not used in the previous tax year.

hotcook

His house has been valued recently at £425k as prior to going into hospital he was thinking of downsizing. There are some savings and premium bonds etc although I couldn't put a figure on it. I know he took out a life policy to mitigate Inheritance Tax on the sale of his house. My mum died 10 years ago and everything went to Dad.

Keep_pedalling

Unless his savings are over £225,000 then there will be no inheritance tax to pay. I would imagine the insurance policy would have been taken out before Oct 2007 when Gordon Brown effectively doubled the allowance for widows / widowers.

hotcook

Thanks everyone!

Mojisola

If you want to get familiar with all the details about IHT -
https://www.gov.uk/inheritance-tax/overview