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GloriousEuropa

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anselld

You are not liable for tax on this.
If she can afford £500 per month from excess regular income then there would be no inheritance tax due. Even if inheritance tax were to become due the liability would be to her estate.

getmore4less

Even then if the money does not fall into any of the exemption categories the inheritance tax if any will be no more than if she had just kept the money in most cases.

There are some complications if she also starts giving away larger(multi £100ks worth) sums or tries to use trusts which can have impacts for 14 years.

xylophone

She should keep records (as should you) of these "regular gifts from income" as when the time comes for her executor to complete the forms for probate/IHT, they will be required.

https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/normal-expenditure-out-of-income-exemption/

xylophone

So will I even need to declare it to the HMRC?

No - just keep records as above for the executor of your grandmother's estate.

Tom99

If you later want to claim the gifts were from excess income then you would need to provide a fairly detailed breakdown of all income and expenditure over the last 7yrs.
Unless the deceased kept detailed records it would be quite difficult for an executor to create that amount of detail.
Check out form IHT403:
https://www.gov.uk/government/publications/inheritance-tax-gifts-and-other-transfers-of-value-iht403

dales1

Yes, the executor has a very hard task to complete IHT 403 for the last 7 years retrospectively.


So I fill in my own draft IHT 403 every year, to back up the gifts out of income that I make.

dales1

I update my own draft IHT403 year by year (well in advance of my croaking it).
This form isn't sent to HMRC, it's just kept on my file for my executors.

I think this procedure will help my executors claim IHT relief, because I am able to analyse my own income, expenditure and gifts (whilst alive) better than my executors can do (once I am gone). My own figures may be more credible in HMRC's eyes.
So the form isn't being done again, it's just being done in draft and in advance to help the executor to claim the correct relief.
Dales.

Tom99

dales1 wrote: »

I update my own draft IHT403 year by year (well in advance of my croaking it).
This form isn't sent to HMRC, it's just kept on my file for my executors.
I think this procedure will help my executors claim IHT relief, because I am able to analyse my own income, expenditure and gifts (whilst alive) better than my executors can do (once I am gone). My own figures may be more credible in HMRC's eyes.
So the form isn't being done again, it's just being done in draft and in advance to help the executor to claim the correct relief.
Dales.

If your want your own estate to be able to claim gifts from income I would second this, I do the same.
Onece a year take a download of all transactions from relevant accounts and allocate each item of income and expenditure, then fill in a draft IHT403.
Takes at least a couple of hours each year.