Inheritance tax + gifts

JeffMinter

I have an uncle who wants to gift my mum £10k. He probably has over 325k in assets, making him liable to pay IHT.  Reading the example from here https://www.gov.uk/inheritance-tax/gifts

-------------------

Sally died on 1 July 2022. She was not married or in a civil partnership when she died.

She gave 3 gifts in the 9 years before her death:

£50,000 to her brother 9 years before her death

£325,000 to her sister 4 years and 2 months before her death

£100,000 to her friend 3 years before her death

There’s no Inheritance Tax to pay on the £50,000 gift to her brother as it was given more than 7 years before she died.

 

There’s also no Inheritance Tax to pay on the £325,000 she gave her sister, as this is within the Inheritance Tax threshold

.

But her friend must pay Inheritance Tax on her £100,000 gift at a rate of 32%, as it’s above the tax-free threshold and was given 3 years before Sally died. The Inheritance Tax due is £32,000.

 

Sally’s remaining estate was valued at £400,000, so the estate would pay Inheritance Tax of 40% on £400,000 (£160,000).

------------------------

Does that mean my mum won't have to pay IHT on the 10k, as he hasn't gifted anything near the 325k value yet? I'm assuming based on the example that its based on when the gift was given - so say the friend was gifted before the sister, she wouldn't have had to pay IHT on her 100k?

FlorayG

I thought it was the estate that paid inheritance tax, not the person gifted? In which case your mother will get to keep the 10k? the person getting the gift gets to keep all that they were gifted
from Gov.uk; Any Inheritance Tax due on gifts is usually paid by the estate, unless you give away more than £325,000 in gifts in the 7 years before your death. Once you’ve given away more than £325,000, anyone who gets a gift from you in those 7 years will have to pay Inheritance Tax on their gift.
I assume he's not planning to give away that much in total?

Albermarle

Normally the estate of the deceased is responsible for any IHT due .
The exceptions can be where gifts within the last 7 years are very large and then some liability can attach to the person receiving the gift.

JeffMinter

FlorayG said:

I thought it was the estate that paid inheritance tax, not the person gifted? In which case your mother will get to keep the 10k? the person getting the gift gets to keep all that they were gifted
from Gov.uk; Any Inheritance Tax due on gifts is usually paid by the estate, unless you give away more than £325,000 in gifts in the 7 years before your death. Once you’ve given away more than £325,000, anyone who gets a gift from you in those 7 years will have to pay Inheritance Tax on their gift.
I assume he's not planning to give away that much in total?

That's the part I'd like to protect my mum from. Obviously we have no power or knowledge over who my uncle gifts to, so in the event he does gift over the allowance, I'd like to know if mum is liable for any of that, so I can advise her to keep it just in case.

Dangerman69

If I have gifted my wife to be say £20,000 before marriage and I die say one year after marriage is my wife liable to pay inheritance tax on this sum??

JoeCrystal

Dangerman69 said:

If I have gifted my wife to be say £20,000 before marriage and I die say one year after marriage is my wife liable to pay inheritance tax on this sum??

It is not your wife that pays the inheritance tax but your estate.

Secret2ndAccount

It is possible that your mother could end up with a bill for IHT. Your uncle's estate will be liable for the IHT. If the estate is insufficient to cover its IHT bill then they go after the recipients of gifts to cover the missing IHT.
Some things which might not be relevant or you might already know:
If your uncle had a wife who predeceased him, he would inherit her 325k allowance, or whatever part of it she didn't use herself. If he is leaving his home to his children, that adds to his IHT threshold also.
The entire estate must be turmed into cash if necessary to pay the IHT bill. This can lead to a property having to be sold against the wishes of some parties because the estate is large but has limited cash. It is possible to arrange payment over a number of years but the bill won't go away.

Star_Rover

 My wife and I will be leaving our house to our daughter when we shuffle off. It is my understanding that this gives us a joint inheritance tax exemption of a million pounds. Could some polymath confirm this.
 

MallyGirl

That is correct

Albermarle

Star_Rover said:

 My wife and I will be leaving our house to our daughter when we shuffle off. It is my understanding that this gives us a joint inheritance tax exemption of a million pounds. Could some polymath confirm this.
 

That is correct under current rules, but as we know things can change.

Veteransaver

Does your uncle have significant income as well, gifts out of income fall outside of this. Eg a gift could legitimately be made monthly out of income over 12 months or so.