Inheritance tax + gifts

Philip_P

Doesn't the £3k annual allowance come off the gift, before calculating the IHT payable?

af1963

This looks like one of the many cases where people get unnecessarily concerned about a tax that affects a small minority of estates.

In this case, even if the estate was eventually due to pay IHT, and even if the uncle had eventually given away enough (more than the IHT allowance) for some IHT to be due on some of the gifts, the order in which any gifts are made would be important. Has he already given away more than £315k not covered by any allowances? If not, a £10k gift made now will fall within the £325k IHT allowance so the recipient won't be due to pay any IHT.

See the worked example. No tax is taken off the first gift because it's more than 7 years ago. None is taken off the second (even though some IHT is due on the gifts within 7 years), as the tax is all taken off the one made after the allowance has been used up by the earlier gift.