Gifts and Inheritance tax

localhero

Basically with a gift this size the ideal outcome is for him to survive for 7 years. Although taper relief is available, upon death any gifts in the last 7 years use up the nil rate band allowance (currently £300,000) first (thereby rendering the taper relief as useless).

CLAPTON

amandathepanda wrote: »

I am interested in this thread. My Dad is selling his bungalow, he is 73 and is moving in to a flat. He will be left with about £100,000 equity which he wants to split between me, my brother and my sister. From what I understand that is okay as long as I look after Dad really well for the next 7 years. If he dies within that timescale what sort of tax figure are we talking about? I hate talking about it but we don't want to be left with a large tax bill at a later date.

If his estate at the time of his death plus the gifts during the last 7 years of his life is more than the IHT allowance (300,000 this year) then the ESTATE is liable for the tax which is 40% of the amount above the IHT allowance.

So you wont personally have to pay anything back because it will come out of his estate at the time of his death.

How much is his estate likely to be?

amandathepanda

If he gives us this money now, he says he only has left the value of the flat approx £160000 plus £70000 in savings.

CLAPTON

a bit unclear is that then

160,000 + 70,000 plus potentially exempt transfer of 100,000 = total of 330,000 ?

if so then there is a potential IHT on the last 30,000 so that would be 40% of 30k = 12k tax

However if he didn't give it to you now and he died then his estate would be worth 330,000 so the estate would still pay 12k tax... so there is no IHT reason not to give it to you now.

amandathepanda

Thanks Clapton, at last I think I understand. :beer: