Gifts out of Income to mitigate inheritance tax

Hairyary

I am aware of the rule about income and expenditure and giving of gifts out of excess income.
However, I have just moved house and am spending a lot on decorating etc and this extra expenditure is taken from the profit selling my last house. This is certainly not normal expenditure but no details how to explain to the tax man. Any ideas?

Marcon

Hairyary said:

I am aware of the rule about income and expenditure and giving of gifts out of excess income.
However, I have just moved house and am spending a lot on decorating etc and this extra expenditure is taken from the profit selling my last house. This is certainly not normal expenditure but no details how to explain to the tax man. Any ideas?

The profit from selling your house isn't going to be part of your 'normal income' and from what you've said, is being cancelled out by the amounts you are spending on decorating etc. Any profit 'left over' won't count as 'regular income' so can't be used to mitigate IHT in respect of gifts. Bear in mind this approach normally relies on someone making regular gifts from income, rather than one-off amounts. 

You simply need to focus on what is your 'normal income' and then look at how this is impacted by the gifts you make. Keeping a simple record of both income and gifts would be extremely helpful to your executors. 

Keep_pedalling

You won’t have to explain to the tax man you will be dead. Are you keeping annual records of your gifts, income and expenditure to enable your executors to claim these exemptions?