Calculating IHT & Gifts Within The 7 Years

jonnyevans909

My father died in March of this year. He gave away monetary gifts to family members in excess of £325k within the 7 year period before he died. I’m trying to obtain advice on what allowances we are able to use for inheritance tax purposes. 

I know his allowance is £325k, but can we use my Mother’s transferable £325k allowance? (She died in 2017) and her allowance wasn’t used at all. Therefore having a total allowance of £650k. If so, would this mean no IHT would be due, even though the gifts exceeded £325k before he passed away? 

Thank you
Jon 

Marcon

jonnyevans909 said:

My father died in March of this year. He gave away monetary gifts to family members in excess of £325k within the 7 year period before he died. I’m trying to obtain advice on what allowances we are able to use for inheritance tax purposes. 

I know his allowance is £325k, but can we use my Mother’s transferable £325k allowance? (She died in 2017) and her allowance wasn’t used at all. Therefore having a total allowance of £650k. If so, would this mean no IHT would be due, even though the gifts exceeded £325k before he passed away? 

Thank you
Jon 

Assuming your mother left everything to your father (and/or charity), then she does indeed have the full nil band to transfer, making life much easier for you.

Is there a property involved and if so was it left to their children/grandchildren? That adds more to the IHT free band. See https://www.gov.uk/guidance/inheritance-tax-residence-nil-rate-band

jonnyevans909

Thanks for your reply. There was no property at the time of death, it was sold 12 months before. I read somewhere about downsizing relief, would this apply in this case do you think? Which would actually increase the allowance higher than the £650k

Keep_pedalling

jonnyevans909 said:

Thanks for your reply. There was no property at the time of death, it was sold 12 months before. I read somewhere about downsizing relief, would this apply in this case do you think? Which would actually increase the allowance higher than the £650k

You will have both his RNRB and her transferable RNRB which takes the exemption up to £1M

getmore4less

jonnyevans909 said:

Thanks for your reply. There was no property at the time of death, it was sold 12 months before. I read somewhere about downsizing relief, would this apply in this case do you think? Which would actually increase the allowance higher than the £650k

Need to do the calculations for the downsizing rules.
Probably will work out as value of house(capped at £350k) if sufficient assets go to a qualifying beneficiary as part of the will.

Don't think it can be used on the lifetime gifts so needs assets in the estate to get used.

Marcon

jonnyevans909 said:

Thanks for your reply. There was no property at the time of death, it was sold 12 months before. I read somewhere about downsizing relief, would this apply in this case do you think? Which would actually increase the allowance higher than the £650k

If you use the link I've given above, that covers downsizing/sale of property.

jonnyevans909

Marcon said:

jonnyevans909 said:

Thanks for your reply. There was no property at the time of death, it was sold 12 months before. I read somewhere about downsizing relief, would this apply in this case do you think? Which would actually increase the allowance higher than the £650k

If you use the link I've given above, that covers downsizing/sale of property.

Yes, many thanks.

So, just to clarify on your first reply, with both allowances of £325k, giving total of £650k, can we then
use this double allowance against the monetary gifts that were given by my Father in the 7 years before his death? 

Keep_pedalling

jonnyevans909 said:

Marcon said:

jonnyevans909 said:

Thanks for your reply. There was no property at the time of death, it was sold 12 months before. I read somewhere about downsizing relief, would this apply in this case do you think? Which would actually increase the allowance higher than the £650k

If you use the link I've given above, that covers downsizing/sale of property.

Yes, many thanks.

So, just to clarify on your first reply, with both allowances of £325k, giving total of £650k, can we then
use this double allowance against the monetary gifts that were given by my Father in the 7 years before his death? 

The gifts are simply part of his estate, so yes the allowances apply in exactly the same way as if he had not made the gifts.

The only other thing that might be of use is taper relief on the part of the gifts that took the total over £235k.