IHT on gift

JGB1955

The estate pays IHT - not the beneficiaries.  YOU will not have to pay any tax on gifts made to you before the death of your benefactor.

Keep_pedalling

benccolman said:

My mother has £400k in the bank.  She is 85 and wants to give me and my sister £100k each.  I am unsure about the payment of IHT.
Please can someone let me know if this is correct:
1) No tax is payable on the £100k gifts (other than on interest they accrue) at the point of giving.
2) If Ma dies within the next 7 years, then my sister and I will each pay the taper relief on the £100k we had + Ma's estate will be valued at £400k (£200k + £200k) so, with a £325k IHT allowance (no property / no spouse), she will have an IHT liability on £75k.
3) If Ma lives for over 7 years then the £100k gifts we each received will be free of IHT and Ma will only pay IHT on the remaining value of her estate (eg £400k less the £200k gifts).
What we are hoping is that we only need to pay IHT (including taper relief, if relevant) after Ma passes away and not beforehand.
Hope someone more clever than me can help as the .Gov.UK info isn't abundantly clear.
Many thanks everyone 

1. That is correct.

2. There is no taper relief on gifts under the nil rate band, so the £200k remains within her estate for 7 years in full. Assuming you mother is not a widow her estate will have a liability on £75k

3. no her estate will be below the NRB so no IHT would be due.

As she is sitting on so much cash and currently renting, she could buy a property to live in which would take her estate out of IHT territory entirely.

naedanger

benccolman said:

My mother has £400k in the bank.  She is 85 and wants to give me and my sister £100k each.  I am unsure about the payment of IHT.
Please can someone let me know if this is correct:
1) No tax is payable on the £100k gifts (other than on interest they accrue) at the point of giving.
2) If Ma dies within the next 7 years, then my sister and I will each pay the taper relief on the £100k we had + Ma's estate will be valued at £400k (£200k + £200k) so, with a £325k IHT allowance (no property / no spouse), she will have an IHT liability on £75k.
3) If Ma lives for over 7 years then the £100k gifts we each received will be free of IHT and Ma will only pay IHT on the remaining value of her estate (eg £400k less the £200k gifts).
What we are hoping is that we only need to pay IHT (including taper relief, if relevant) after Ma passes away and not beforehand.
Hope someone more clever than me can help as the .Gov.UK info isn't abundantly clear.
Many thanks everyone 

Your questions have been answered by others.
But if you mother ever had a house or a spouse then her estate may be able to claim further allowance.

Jeremy535897

1) No tax is payable on the £100k gifts (other than on interest they accrue) at the point of giving.

Correct.

2) If Ma dies within the next 7 years, then my sister and I will each pay the taper relief on the £100k we had + Ma's estate will be valued at £400k (£200k + £200k) so, with a £325k IHT allowance (no property / no spouse), she will have an IHT liability on £75k.

There is no tax on the gifts, as they are within the nil rate band, and so no taper relief. Her estate will be treated as being worth £394,000 (£400,000 less 2 years of annual exemptions of £3,000 assuming not used elsewhere), assuming the £200,000 she has left does not change in value, and under current legislation, inheritance tax will be due on £69,000.

3) If Ma lives for over 7 years then the £100k gifts we each received will be free of IHT and Ma will only pay IHT on the remaining value of her estate (eg £400k less the £200k gifts).

Correct, if her estate is still worth £200,000 at that time, on which no inheritance tax will be payable under current legislation.

Sea_Shell

Keep_pedalling said:

benccolman said:

My mother has £400k in the bank.  She is 85 and wants to give me and my sister £100k each.  I am unsure about the payment of IHT.
Please can someone let me know if this is correct:
1) No tax is payable on the £100k gifts (other than on interest they accrue) at the point of giving.
2) If Ma dies within the next 7 years, then my sister and I will each pay the taper relief on the £100k we had + Ma's estate will be valued at £400k (£200k + £200k) so, with a £325k IHT allowance (no property / no spouse), she will have an IHT liability on £75k.
3) If Ma lives for over 7 years then the £100k gifts we each received will be free of IHT and Ma will only pay IHT on the remaining value of her estate (eg £400k less the £200k gifts).
What we are hoping is that we only need to pay IHT (including taper relief, if relevant) after Ma passes away and not beforehand.
Hope someone more clever than me can help as the .Gov.UK info isn't abundantly clear.
Many thanks everyone 

2. There is no taper relief on gifts under the nil rate band, so the £200k remains within her estate for 7 years in full. 

I thought that ANY gift would be eligible for taper relief if it would otherwise have pushed the estate back into IHT territory?

i.e. A single unmarried person, with no property would have an IHT allowance of £325,000 (standard).  So lets say that is also the value of their estate at the time of death.  If they had given a gift of £50,000 1 year ago, then their estate WOULD have otherwise been £375,000.    They have £3000 pa gift allowance, which backdated could take account of £6000, leaving £44,000 subject to IHT = £17,600.

If this gift was given over 7 years ago no IHT would be due, but a sliding scale could be used for years 1-7?

Is that not right?

Keep_pedalling

Sea_Shell said:

Keep_pedalling said:

benccolman said:

My mother has £400k in the bank.  She is 85 and wants to give me and my sister £100k each.  I am unsure about the payment of IHT.
Please can someone let me know if this is correct:
1) No tax is payable on the £100k gifts (other than on interest they accrue) at the point of giving.
2) If Ma dies within the next 7 years, then my sister and I will each pay the taper relief on the £100k we had + Ma's estate will be valued at £400k (£200k + £200k) so, with a £325k IHT allowance (no property / no spouse), she will have an IHT liability on £75k.
3) If Ma lives for over 7 years then the £100k gifts we each received will be free of IHT and Ma will only pay IHT on the remaining value of her estate (eg £400k less the £200k gifts).
What we are hoping is that we only need to pay IHT (including taper relief, if relevant) after Ma passes away and not beforehand.
Hope someone more clever than me can help as the .Gov.UK info isn't abundantly clear.
Many thanks everyone 

2. There is no taper relief on gifts under the nil rate band, so the £200k remains within her estate for 7 years in full. 

I thought that ANY gift would be eligible for taper relief if it would otherwise have pushed the estate back into IHT territory?

i.e. A single unmarried person, with no property would have an IHT allowance of £325,000 (standard).  So lets say that is also the value of their estate at the time of death.  If they had given a gift of £50,000 1 year ago, then their estate WOULD have otherwise been £375,000.    They have £3000 pa gift allowance, which backdated could take account of £6000, leaving £44,000 subject to IHT = £17,600.

If this gift was given over 7 years ago no IHT would be due, but a sliding scale could be used for years 1-7?

Is that not right?

No, the size of the estate does not matter, it is the size of the gift that counts. Taper relief only applies when you gift above the NRB and even then only to the portion of the gift over the NRB.

Sea_Shell

Keep_pedalling said:

Sea_Shell said:

Keep_pedalling said:

benccolman said:

My mother has £400k in the bank.  She is 85 and wants to give me and my sister £100k each.  I am unsure about the payment of IHT.
Please can someone let me know if this is correct:
1) No tax is payable on the £100k gifts (other than on interest they accrue) at the point of giving.
2) If Ma dies within the next 7 years, then my sister and I will each pay the taper relief on the £100k we had + Ma's estate will be valued at £400k (£200k + £200k) so, with a £325k IHT allowance (no property / no spouse), she will have an IHT liability on £75k.
3) If Ma lives for over 7 years then the £100k gifts we each received will be free of IHT and Ma will only pay IHT on the remaining value of her estate (eg £400k less the £200k gifts).
What we are hoping is that we only need to pay IHT (including taper relief, if relevant) after Ma passes away and not beforehand.
Hope someone more clever than me can help as the .Gov.UK info isn't abundantly clear.
Many thanks everyone 

2. There is no taper relief on gifts under the nil rate band, so the £200k remains within her estate for 7 years in full. 

I thought that ANY gift would be eligible for taper relief if it would otherwise have pushed the estate back into IHT territory?

i.e. A single unmarried person, with no property would have an IHT allowance of £325,000 (standard).  So lets say that is also the value of their estate at the time of death.  If they had given a gift of £50,000 1 year ago, then their estate WOULD have otherwise been £375,000.    They have £3000 pa gift allowance, which backdated could take account of £6000, leaving £44,000 subject to IHT = £17,600.

If this gift was given over 7 years ago no IHT would be due, but a sliding scale could be used for years 1-7?

Is that not right?

No, the size of the estate does not matter, it is the size of the gift that counts. Taper relief only applies when you gift above the NRB and even then only to the portion of the gift over the NRB.

So in my example above, would the full 40% tax be due on the £17,600 for the full 7 year period?   Or is it not in the equation at all?     Would the taxable estate be £325,000 or £375,000?

Sorry, I'm struggling to get my head around this, as it seems to be widely thought that even smaller gifts (but over the £3000 pa allowance) are subject to this sliding scale of IHT due, until a full 7 years have passed.    

Jeremy535897

Sea_Shell said:

Keep_pedalling said:

Sea_Shell said:

Keep_pedalling said:

benccolman said:

My mother has £400k in the bank.  She is 85 and wants to give me and my sister £100k each.  I am unsure about the payment of IHT.
Please can someone let me know if this is correct:
1) No tax is payable on the £100k gifts (other than on interest they accrue) at the point of giving.
2) If Ma dies within the next 7 years, then my sister and I will each pay the taper relief on the £100k we had + Ma's estate will be valued at £400k (£200k + £200k) so, with a £325k IHT allowance (no property / no spouse), she will have an IHT liability on £75k.
3) If Ma lives for over 7 years then the £100k gifts we each received will be free of IHT and Ma will only pay IHT on the remaining value of her estate (eg £400k less the £200k gifts).
What we are hoping is that we only need to pay IHT (including taper relief, if relevant) after Ma passes away and not beforehand.
Hope someone more clever than me can help as the .Gov.UK info isn't abundantly clear.
Many thanks everyone 

2. There is no taper relief on gifts under the nil rate band, so the £200k remains within her estate for 7 years in full. 

I thought that ANY gift would be eligible for taper relief if it would otherwise have pushed the estate back into IHT territory?

i.e. A single unmarried person, with no property would have an IHT allowance of £325,000 (standard).  So lets say that is also the value of their estate at the time of death.  If they had given a gift of £50,000 1 year ago, then their estate WOULD have otherwise been £375,000.    They have £3000 pa gift allowance, which backdated could take account of £6000, leaving £44,000 subject to IHT = £17,600.

If this gift was given over 7 years ago no IHT would be due, but a sliding scale could be used for years 1-7?

Is that not right?

No, the size of the estate does not matter, it is the size of the gift that counts. Taper relief only applies when you gift above the NRB and even then only to the portion of the gift over the NRB.

So in my example above, would the full 40% tax be due on the £17,600 for the full 7 year period?   Or is it not in the equation at all?     Would the taxable estate be £325,000 or £375,000?

Sorry, I'm struggling to get my head around this, as it seems to be widely thought that even smaller gifts (but over the £3000 pa allowance) are subject to this sliding scale of IHT due, until a full 7 years have passed.    

A lot of things are widely thought, and are completely wrong. This is one of them. From https://www.canadalife.co.uk/technical-support/taper-relief/

"Taper relief causes a lot of confusion over when it applies and how it works.

To start with, although it is called taper ‘relief’, it is not strictly a relief as defined elsewhere in the Inheritance Tax Act 1984 (IHTA). It is actually a percentage reduction in the tax payable. It does not reduce the capital value of the gift – it only reduces the actual tax payable. Therefore, if there is no tax payable on death on a specific gift, you cannot claim taper relief to reduce the value of that gift.

Consequently, any gift which sits inside the available nil rate band (NRB) – currently up to £325,000 or up to £650,000 if a transferable nil rate band is available – cannot benefit from taper relief. Taper relief (under IHTA/S7(4)) applies where:

1. the gift was made more than three years but less than seven years before the transferor’s death, and
2. tax is due on the gift in its own right."

benccolman

Thank you all for your advice - really helpful and clear.  Much appreciated!!

Sea_Shell

I think they'll be alot of people gifting fairly substantial funds, thinking that it will take them (if only partially) out of IHT range, only to find that it hasn't.