Help with inheritance tax

Themoneysaver

Hi Everyone, long time lurker here...

I have reached the unfortunate age where my parents are now talking seriously about what happens after they ‘go’

Last year my parents paid for a new kitchen for us and a bunch of other things like flooring, white goods etc. In total this came to around 35k. They are worried should they die that it will be considered a gift and would be liable for tax (assuming they don’t live for another 6/7 years). There was no gifting of cash to me, they simply paid for the stuff we chose together and we had it delivered.

We’ll happily pay what’s due, but have no idea how this is viewed by HMRC so I thought I’d ask the sage and wise here before consulting with an IFA.

Thank you!

Keep_pedalling

Some, but not all, of this would indeed form part of their estate for the next 6 years or so. They both have annual allowances of £3000, and if they made no other gifts then £6000 will be exempt, and you could double that if they made no gifts in the previous financial year.

Unless people have given such away large sums of money that the estate cannot pay any IHT due, then any tax due will be payed from the remaining estate not the people receiving the gifts.

All this is pretty academic if their estate is under their combined allowances, which if they own a house that will be left to direct descendants is currently £900,000, which will rise to £1 over the next couple of years.

Edit - I have assumed your parents are married.

Your parents should keep a record of this and other gifts, to make life easier for their executors, preferably keeping a copy of the gifts with their will.

Themoneysaver

Thanks for the reply Keep Pedalling and the clarification around the estate paying vs the recipients of gifts.

I'm not sure on estate values but it seems prudent to make sure this is all recorded.

Tom99

If they had not gifted you £35k but kept it they would have paid IHT anyway, so if they last 6 yrs they will have saved IHT by that gift.

kidmugsy

We used to go to a hotel in the summer notable for the number of three-generation families on their hols. I suspect Grandpa was paying for everyone, taking what I think of as his 40% discount.

antrobus

Themoneysaver wrote: »

...Last year my parents paid for a new kitchen for us and a bunch of other things like flooring, white goods etc. In total this came to around 35k. They are worried should they die that it will be considered a gift and would be liable for tax (assuming they don’t live for another 6/7 years). There was no gifting of cash to me, they simply paid for the stuff we chose together and we had it delivered.....

Technically speaking, it would be considered a gift by HMRC. These are potentially exempt transfers (PET).

See the 7 year rule here
https://www.gov.uk/inheritance-tax/gifts

kidmugsy wrote: »

We used to go to a hotel in the summer notable for the number of three-generation families on their hols. I suspect Grandpa was paying for everyone, taking what I think of as his 40% discount.

Well, yes, quite. Far be it for me to encourage such things. But where people fail to record such 'gifts', their executors may well have no knowledge of them. HMRC does not routinely request seven years worth of bank statements or credit card statements for the recently deceased and then go through them with a fine tooth comb raising queries about payments to ABC Kitchens or XYZ Holidays.

Cankits

Can anyone tell me what the rules are regarding cash gifts over £3k from parents who's estate falls below the current £325k threshold.

agrinnall

Cankits wrote: »

Can anyone tell me what the rules are regarding cash gifts over £3k from parents who's estate falls below the current £325k threshold.

You should really start your own thread, but in the circumstance you describe there are no inheritance tax implications for gifts of any size (but that may not be the case if the parents have to go into care - look up deprivation of assets).

Cardew

antrobus wrote: »

Originally Posted by kidmugsy
We used to go to a hotel in the summer notable for the number of three-generation families on their hols. I suspect Grandpa was paying for everyone, taking what I think of as his 40% discount.

Well, yes, quite. Far be it for me to encourage such things. But where people fail to record such 'gifts', their executors may well have no knowledge of them. HMRC does not routinely request seven years worth of bank statements or credit card statements for the recently deceased and then go through them with a fine tooth comb raising queries about payments to ABC Kitchens or XYZ Holidays.

Well said!