The 7 year gifting rule and IHT allowance limit.

ljayljay

getmore4less said:

Standard practice was use 205 until it tells you to use the 400 family of forms.

Yes but there were changes from 1 January 2022 for excepted estates to no longer complete any IHT forms. There are still some specific exceptions to this rule but it does mean that the the vast majority of estates no longer liable to IHT can declare directly onto the probate forms. There is some more explanation from the Law Society below & the links to the relevant parts of the gov.uk site.

https://www.lawsociety.org.uk/en/topics/private-client/probate-changes

specifically this -

Excepted estates

On 1 January 2022, Inheritance Tax (Delivery of Accounts) (Excepted Estates) (Amendment) Regulations 2020 come into force.

The regulations change the reporting requirements for excepted estates: these are estates below the current inheritance tax (IHT) threshold.

This regulation confirms that administrators for a person domiciled in the UK with an excepted estate, who dies on or after 1 January 2022, no longer need to complete the IHT205 or IHT217 (where applicable).

Read the guidance on identifying excepted estates

The Gov.UK site lists the exceptions when IHT forms required for excepted estates here -

https://www.gov.uk/valuing-estate-of-someone-who-died/check-type-of-estate

specifically this -

When to send full details of the estate’s value even if no tax is due

You’ll need to send full details of the estate, even if no tax is due, if the person who died:

• gave away over £250,000 in the 7 years before they died (£150,000 if the person died on or before 31 December 2021)
• gave gifts then continued to benefit from them in the 7 years before they died
• left an estate worth more than £3 million (more than £1 million if they died on or before 31 December 2021)
• died on or before 31 December 2021 and had inherited part of the Inheritance Tax threshold from a previous spouse or civil partner
• was ‘deemed domiciled’ in the UK
• had foreign assets worth more than £100,000
• was living permanently outside the UK when they died but had previously lived in the UK
• had a life insurance policy that paid out to someone other than their spouse or civil partner and also had an annuity
• had increased the value of a lump sum from a personal pension to be paid after their death, while they were terminally ill or in poor health
• had agreed that property they’d given away during their lifetime would be part of their estate rather than pay a pre-owned asset charge

kantblue

Thanks for all the replies, I have downloaded the PA1P form -

PA1P - Citizen applicants for deaths post 1 January 2022 where the estate is an excepted estate

It says in the opening preamble checklist of items that need sending back with the form:

Inheritance Tax Summary Form: Please submit the appropriate form (IHT205 or IHT207, and IHT217 if applicable), signed by all applicants (see additional notes in Section 7).

If I download IHT205 it clearly says at the top of the form 'Do not use this form for deaths after January 1st 2022'

If I download IHT217 it clearly says at the top of the form 'Do not use this form for deaths after January 1st 2022'

If I download IHT207 it is not needed as it is for someone living abroad at the time of their death.

So as far as I see form PA1P which is specifically for anyone who died after 1st January 2022 and left a will is wrong right from the off - or is this just me?

Section 7 of this form does ask for figures from IHT205 and mentions doing 'IHT205 online' - is this different to the paper form does anyone know.

I have decided to start the 'Online Probate application' and see how this pans out - but so far this hasn't asked me anything about transferring the IHT band from my mother.

ljayljay

I think the advice & layout on HMRC site could be clearer. However, I can see questions on the PA1P hardcopy that does cover NRB transfer.

i.e.

7.5 Did the deceased die on or after 1 January 2022?
Yes
No. Go to question 7.9

So, answering No i.e. deaths prior to this year will ask for IHT205 at 7.9.

However, answering Yes to 7.5 will take you to 7.7

 

7.7 Are you claiming against this estate the unused proportion of the inheritance
tax nil-rate band of a pre-deceased spouse or civil partner of the deceased?

I agree that the checklist wording at the beginning is a little confusing, but my take would be that this is more of a reminder of what items are needed if appropriate. Especially as the checklist includes foreign wills that would clearly be inappropriate in most cases.

I think it is also confusing that there are two hardcopy PA1P templates for pre & post January 2022 but then the post January 2022 PA1P goes on & asks questions that relate to deaths prior to January 2022, so this is rather baffling. I hope that the online application I aim to do later in the week is somewhat clearer.

Good luck with the online version.

Keep_pedalling

As these changes a quite major I think we could do with this info on a new sticky thread.

kantblue

Hi All - I have completed the 'Online Probate' form which seemed much simpler and easier to understand than the paper form.

It did ask me if I wanted to Transfer my Mums allowance to my father. It also asked if I had sent any forms to the Tax Office to which I replied 'No' so lets see what happens.

In theory and hopefully practice the changes do mean you don't have to fill any forms in for HMRC IHT provided you meet the condition that no IHT is payable - we shall see!

Kantblue

kantblue

That sounds like a good idea - the actual changes still look to me like a work in progress - when I completed the online Probate I was asked if I was willing to take part in a survey which I did. I was then asked if I would consider taking part in an additional survey so I'm hoping they are listening.

Merging IHT and Probate together makes sense but my impression is that they haven't got it quite right yet, not helped by misleading information both on the HMRC site and with their online help services. The Probate chat helpline never asked me what date my father had died and merely directed me to IHT205.

I think would be better if the first question HMRC asks is when did the person die and then funnels them to the right forms rather then letting people download forms which are no longer needed.

kantblue