Inheritance tax and cash gift

Big_Dipper

My Mother gifted me £200k over 3 yrs. She’d sadly passed away recently, before the 7 yr tax exemption time frame was over. I therefore presume that I am now liable for IHT on that amount.

Would someone be able to clarify the tax implications of this situation?

Thanks

le_loup

No the estate is liable, not you unless there is not enough in the estate to meet any IHT liability.
However, there are considerable allowances. Did your father leave all his estate to your mother? How much is your mothers estate worth - excluding the £200k she gave to you? What is the value of her house?

xylophone

https://www.gov.uk/guidance/work-out-what-part-of-your-estate-pays-inheritance-tax

Are you the executor of your mother's estate?

Was there any transferable allowance from your father's estate?

What is the position with regard to the family home allowance?

See https://www.gov.uk/guidance/inheritance-tax-transfer-of-threshold

macman

If IHT is due on the gift, it'll be charged at 40% on anything gifted in the 3 years prior to death. From 3 to 7 years, taper relief will apply. No one else can work it out for you without knowing how much was gifted and in which year.
Don't 'presume' anything: once probate is obtained and the value of the estate known, you can do the maths.

Keep_pedalling

macman wrote: »

If IHT is due on the gift, it'll be charged at 40% on anything gifted in the 3 years prior to death. From 3 to 7 years, taper relief will apply. No one else can work it out for you without knowing how much was gifted and in which year.
Don't 'presume' anything: once probate is obtained and the value of the estate known, you can do the maths.

Taper relief only applys to gifts over the nil rate band, so it won’t apply here unless she gifted similar amounts to other people as well.

Big_Dipper

Thank you for the responses. To answer the specific questions;
- my fathers alowance was transferred across
- I am joint executor of the estate
- property within the estate uses up all tax free allowance

A separate, but similar question - through discovery on estate, it appears my mother ‘loaned’ my brother a further 200k. This also took place within the 7 yr time frame before her death. He had paid her back 20k.

What are the tax implications of this loan, and is the estate or my brother liable?

Thanks again for your help.

getmore4less

The gifts use up the nil rate band first.

You will need to add the £180k loan to the estate.

Don't forget the residential nil rate band(s).

Keep_pedalling

Big_Dipper wrote: »

Thank you for the responses. To answer the specific questions;
- my fathers alowance was transferred across
- I am joint executor of the estate
- property within the estate uses up all tax free allowance

A separate, but similar question - through discovery on estate, it appears my mother ‘loaned’ my brother a further 200k. This also took place within the 7 yr time frame before her death. He had paid her back 20k.

What are the tax implications of this loan, and is the estate or my brother liable?

Thanks again for your help.

Seems a bit odd, that you get a gift and your brother only gets a loan. Is their any documentation that proves this was a loan rather than a gift? If not your brother might well be claiming it was a gift to even things up a bit.

Treating children in such an uneven way is often a receipt for major conflict, so don’t be surprised if this does not pan out too well.

Tom99

[FONT=Verdana, sans-serif]Remember to deduct the £3k pa allowance from the £200k gift, so 3x £3k and if the year before that the allowance was not used that can be carried forward so 4x £3k=£12k.[/FONT]

Big_Dipper

Keep_pedalling wrote: »

Seems a bit odd, that you get a gift and your brother only gets a loan. Is their any documentation that proves this was a loan rather than a gift? If not your brother might well be claiming it was a gift to even things up a bit.

Treating children in such an uneven way is often a receipt for major conflict, so don’t be surprised if this does not pan out too well.

No documentation has been forthcoming as of yet. I don’t know why there was different treatment to the sums of money I’m afraid. Would documentation be legally required to prove the loan status?

Alarae

If the monies to your brother was treated as a loan, and you can justifiably evidence it through regular repayments, then the loan will need to be called into the estate and added to the total. He will either need to repay this in full, or if he is a beneficiary in the will, the Executor can set the balance against his share if it will not be to the detriment to the other beneficiaries and not against the wishes of the will.

If no other gifts were made in the last seven years (ignoring loan), the potential exempt amount is £194,000 (£200,000 less annual allowance plus one year carry forward).

The NIL rate band of the Estate will be set against this first, so no additional IHT will be due on death.

As a result, the Estate will have a reduced NIL rate band, and as such may be charged to iht.

I do want to correct some advice posted further up that it is the recipient of the gift that is liable to IHT on the gift (if not covered by NIL rate band) and not the Estate.

Taper relief works by relieving 20%-80% of the tax due if the gift is made over 3 years from death. The percentage increases by 20% each year.

Ignoring NIL rate bands available as an example:

PET £194,000

No NRB

IHT @ 40% = £77,600

Taper relief @ 20% (3-4 years) = (£15,520)

IHT payable be recipient = £62,080