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Inheritance tax question

Rosegoldflame
Posts: 1 Newbie
in Cutting tax
Hi all, newbie here. I am wanting to know if anyone can confirm that the 325000 IHT free allowance also applies if inheritance is gifted early? I know there are rules about 3000 per year allowed to be gifted and also the sliding scale of 1- 7 years with extra gifts above that.
But if the estate is worth £325000, and therefore within that IHT free amoung, but the house is sold early and distrubuted, does this go under the tax free rule, or is it treated as a gift, and subject to the 1-7 year reducing scale? My common sense tells me it should be the former, but would love any further input, thank you
But if the estate is worth £325000, and therefore within that IHT free amoung, but the house is sold early and distrubuted, does this go under the tax free rule, or is it treated as a gift, and subject to the 1-7 year reducing scale? My common sense tells me it should be the former, but would love any further input, thank you
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Comments
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Your post is a bit confusing (at least to me).
Are you saying that there is an estate of someone still living that is worth worth £325,000 including a house ?
My understanding is that if they sold the house and gave the proceeds away but then died within 7 years then the value gets added back into their estate for IHT calculation purposes. But there would be no inheritance tax to pay as the remaining estate + gift is under the IHT allowance.
The 'reducing scale' (taper relief) only applies if the value of the gift is over the IHT allowance, which is not the case here.1 -
Any gifts not covered by exemptions, such as the £3k annual exemption, are subject to the 7 year rule, so if I gift £300k today but die 6 years later that £300k is still part of my estate for IHT purposes (taper relief only applies if you gift more than your NRB, and only applied to the amount over that value (£325k).
Unless this person had plenty of other assets available selling your home and giving all the proceeds away would be a very foolish thing to do and would be treated as deliberate deprivation of assets as far as benefits and care costs are concerned.2 -
and also the sliding scale of 1- 7 years with extra gifts above that.
There is a a lot of misunderstanding about taper relief/sliding scale in this situation.
It only applies in certain circumstances and not in the case you describe.
Any gift ( apart from the £3K) will be 100% counted back into the estate, if the giver dies within 7 years.0
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