IHT and gifts

onomatopoeia99

No-one has died, so this one doesn't belong in the deaths, wills and probate section. I got asked this by my parents at the weekend and I don't know the answer, the gov.uk site doesn't seem to say anything specific (might be a reading failure on my part, of course), so asking here.

Situation is my parents (they are married) gave me a cash gift a little over the annual exempt gifts threshold of £3,000. It came in the form of a cheque drawn on a sole account of one parent. For background, while they run their main finances through a joint account, they have various individual and joint accounts to make the best of various interest rate offers on the first £xxx deposited, as I imagine many here do, and of course "Individual savings accounts" with their tax benefits are by their nature individual..

In the event that parent dies within seven years does the gift then become part of the estate, or does it need both parents to die before becoming part of the estate? And supplementary question is whether drawing it on their joint account would have affected anything in this regard?

Then there is also this page https://www.gov.uk/inheritance-tax/gifts that helpfully / confusingly states:

People you give gifts to will be charged Inheritance Tax if you give away more than £325,000 in the 7 years before your death.

Does it mean what it says and there is only IHT liability if the value of gifts is over £325,000? That seems unlikely given other wording about gifts being part of the estate.

Any insight gratefully received. I'm still telling them to spend their savings on enjoying themselves ...

noh

The annual IHT gift exemption is £3000 per donor.
£3000 of the gift to you is therefore exempt.
The excess over £3k could be covered by carrying forward the previous years unused allowance, if any, otherwise the excess will need to be added back into the estate if death occurs within seven years.

£325000 is the current threshold for IHT.
If a donor dies within 7 years of making a gift then the value of those gifts is added back into the estate. The value of those gifts is first used against the £325k allowance therefore any gifts up to that value are free of tax as they use the allowance. The IHT due on the amount of the gift over £325k may be subject to taper relief depending on time between gift and death. If there is not sufficient in the estate to pay the IHT due on the gift then the receiver of the gift is liable to pay the tax due.

onomatopoeia99

Yup, I thought the gov.uk site was misleading in that regard.

My core question remains though, if the gift comes from a married couple, who is the donor if one of them dies in the seven years?

Tom99

onomatopoeia99 wrote: »

Yup, I thought the gov.uk site was misleading in that regard.

My core question remains though, if the gift comes from a married couple, who is the donor if one of them dies in the seven years?

If from a sole account then its a gift from that parent, if its a gift from a joint account its 2 gifts split 50/50 between each parent.