IHT on gifts within 7 year period

pensioner_999

Can someone please tell me if I am understanding this correctly 

Mum died recently and we have to handle the IHT forms

Dad died 5 years earlier passing everything to mum (mirror will)

So as I understand it her inheritance tax threshold will be

325k - her basic 

325k - dads basic

175k - her RNRB - she owns a flat

175k - dads RNRB - mum + dad jointly owned a house 

Total IHT threshold = 950k

The value of her estate is coming in at about 530K (including gifts below)

Mum gave my sibling and I gifts of 80k each in 2019

So we have to declare value of those gifts on the IHT403 form but not on the IHT400

The 403 form says "we may need to add the value of these gifts to the value of the estate at the date of death" 

But since value of estate + gifts is still less than Total IHT - there should be no IHT payable ?

Also from .gov.uk site (reference #1)

Says "If the value of the gifts is more than the basic threshold, there’ll be Inheritance Tax to pay on those gifts"

Since the total value of the gifts is less than her basic threshold (325k)  - there should be no IHT payable ? 

Based on those 2 points I think there should be no IHT payable on the gifts 

Is that correct ?  or have a misunderstood something ?

reference #1 

gov  dot  uk/guidance/work-out-what-part-of-your-estate-pays-inheritance-tax

See item #5

getmore4less

Only one property can be used for the RNRB

if the total estate with the gifts added back is under £650k(2*£325k) that is probably the easy route.

no need to mess about with the RNRB.

Keep_pedalling

As you don’t need either RNRB, you should be able to get away with using IHT 205 rather than the more complex IHT 400.

pensioner_999

Thanks
We tried the 205 form, But on the question about Gifts 
it says
"If you answered ‘Yes’ to either part of this question, include the chargeable value of the gifts in box 9.1.
But if this value is more than £150,000 or the assets do not qualify as ‘specified transfers’,
Stop filling in this form. You will need to fill in form IHT400 ‘Inheritance Tax account’ instead"

But our gifts total 160k  - Not sure why the form  has the 150k limit ?

Keep_pedalling

pensioner_999 said:

Thanks
We tried the 205 form, But on the question about Gifts 
it says
"If you answered ‘Yes’ to either part of this question, include the chargeable value of the gifts in box 9.1.
But if this value is more than £150,000 or the assets do not qualify as ‘specified transfers’,
Stop filling in this form. You will need to fill in form IHT400 ‘Inheritance Tax account’ instead"

But our gifts total 160k  - Not sure why the form  has the 150k limit ?

I think the limits are rather arbitrary. 

pensioner_999

I think we do need to use at least  1 x RNRB

@ GetMore4less
This page does seem to imply 2 x RNRBs can be used - assuming not all used up on the 1st death  - although I think we only need 1 anyway
gov dot uk/guidance/inheritance-tax-residence-nil-rate-band

IHT Thresh      :  325 + 325 + 175  = 825
Estate + Gifts  :  530 + 80 + 80      = 690

So no IHT to pay - Correct ?

Without the RNRB the threshold is only 650 - so there would be tax to pay on 40

getmore4less

You have changed the total.

The value of her estate is coming in at about 530K (including gifts below)

Keep_pedalling

pensioner_999 said:

I think we do need to use at least  1 x RNRB

@ GetMore4less
This page does seem to imply 2 x RNRBs can be used - assuming not all used up on the 1st death  - although I think we only need 1 anyway
gov dot uk/guidance/inheritance-tax-residence-nil-rate-band

IHT Thresh      :  325 + 325 + 175  = 825
Estate + Gifts  :  530 + 80 + 80      = 690

So no IHT to pay - Correct ?

Without the RNRB the threshold is only 650 - so there would be tax to pay on 40

Correct no tax to pay, but you confused us previously saying the £530k included rather than excluded the gifts.

pensioner_999

Yes - my mistake !!!     

Thanks !!

Keep_pedalling

This might be the time to look at your own IHT planning especially if you have children. If your inheritance puts your own estate in the position of having to pay IHT, then it might be worth looking at a deed of variation to pass some of your inheritance directly to your children to avoid it ever entering your estate.

pensioner_999

getmore4less said:

Only one property can be used for the RNRB

if the total estate with the gifts added back is under £650k(2*£325k) that is probably the easy route.

no need to mess about with the RNRB.

Accepted that we don't need  2 x RNRB for Mums case

Thinking forward to my time, Why do you say only 1 property RNRB can be used ?

The 'general' number for IHT limit which gets bandied about is approx. 1 million

The only way to make that number for a normal couple  is 2 x 325k   +  2 x 175k