Taper relief IHT

[Deleted User]

castle96 said:

1 x £3k? Dont I get 3x £3k + 1x£3k for the previous/1st yr

Where are you getting 3 x £3k from? You have one £3k exemption and an additional £3k if not used the previous year. 

Jeremy has, as stated, assumed, in his calculation that one £3k exemption is appropriate. (He will, no doubt, correct me if not the case)

Jeremy535897

castle96 said:

1 x £3k? Dont I get 3x £3k + 1x£3k for the previous/1st yr

I assumed one annual exemption, as I said. if you didn't use the previous year's, you can use that too, which will reduce the gifts to £54,000. You don't get an annual exemption per donee. There is a small gifts exemption of £250 per person per year, but you can't use it for the same donee as the annual exemption.

Albermarle

Jeremy535897 said:

Your estate is currently worth £675,000. Previous gifts are roughly £57,000 (assuming one annual exemption of £3,000). Nil rate band remaining £500,000 less £57,000 = £443,000. Tax is charged on £675,000 less £443,000 = £232,000, which at 40% = £92,800. The gifts will drop out of account 7 years after they were made. No taper relief is available, as the gifts did not exceed the nil rate bands. Leaving your estate entirely to your sons without specifically mentioning the house will suffice to qualify for the residential nil rate band.
https://www.gov.uk/guidance/inheritance-tax-residence-nil-rate-band

OP - If you leave at least 10% of your net estate to charity, it will reduce the tax rate payable to 36%. Plus of course you reduce your estate by the amount you give.
So if my calculation is right, you could give £23,200 to charity and then pay 36% of £208,800 = £75,168

Overall the charity would gain by £23,200 at a cost to you of you of £5,568. 

NannaH

So if you give £50k as a gift and die 6 years and 11 months afterwards,  that £50k fully counts as part of your estate? (Minus the £3k + £3k previous year’s allowance)  

Well I never,  I thought the taper counted for any amount. 

Best to just take lump sums of cash out then and divvy it up.  

No wonder the push for a cashless society. 

Someone withdrawing £300-£1000 a month and giving it away could be spending it at the Bingo or down the pub for all anyone would know.

[Deleted User]

NannaH said:

So if you give £50k as a gift and die 6 years and 11 months afterwards,  that £50k fully counts as part of your estate? (Minus the £3k + £3k previous year’s allowance)  

Well I never,  I thought the taper counted for any amount. 

Best to just take lump sums of cash out then and divvy it up.  

No wonder the push for a cashless society. 

Someone withdrawing £300-£1000 a month and giving it away could be spending it at the Bingo or down the pub for all anyone would know.

There’s always the ‘never used enough’ exemption - REGULAR gifts out of income! 

Under ‘If you make regular payments’

https://www.gov.uk/inheritance-tax/gifts

Albermarle

NannaH said:

So if you give £50k as a gift and die 6 years and 11 months afterwards,  that £50k fully counts as part of your estate? (Minus the £3k + £3k previous year’s allowance)  

Well I never,  I thought the taper counted for any amount. 

Best to just take lump sums of cash out then and divvy it up.  

No wonder the push for a cashless society. 

Someone withdrawing £300-£1000 a month and giving it away could be spending it at the Bingo or down the pub for all anyone would know.

Well I never,  I thought the taper counted for any amount.
You are not alone, it appears to be a very common misconception. A lot of the articles about it are very unclear.

Someone withdrawing £300-£1000 a month and giving it away could be spending it at the Bingo or down the pub for all anyone would know.

For sure there are some grey areas. Such as going on a family holiday and you paying for it all ( just one example ) 

Jeremy535897

Most of the time the burden falls upon the executors to try to identify gifts, because records have not been kept. Things like holidays would probably not be picked up. It really is a very silly tax.

castle96

Just took a 'poll' in the pub... Q) "If you gave away money over 7 yrs ago, do you think it would come outside your estate, now, for IHT purposes and your estate would not betaxed on it". All 8 thought it would ! I could not convince them

Albermarle

castle96 said:

Just took a 'poll' in the pub... Q) "If you gave away money over 7 yrs ago, do you think it would come outside your estate, now, for IHT purposes and your estate would not betaxed on it". All 8 thought it would ! I could not convince them

The level of personal finance knowledge amongst the large majority of the general public, ranges from poor to abysmal to non existent.

Keep_pedalling

castle96 said:

Just took a 'poll' in the pub... Q) "If you gave away money over 7 yrs ago, do you think it would come outside your estate, now, for IHT purposes and your estate would not betaxed on it". All 8 thought it would ! I could not convince them

The way you have phrased that all 8 are correct, gifts given over 7 years do fall outside your estate.