Gifts for IHT: interaction between tax years and date of death

JamesRobinson48

I’ve read HMRC’s guidance notes on gifts, including the seven year rule and the annual (per tax year) exempt amounts of £250 per recipient and £3000 respectively.  I’d like to ask two specific queries about the interaction between date of death and tax years. Thanks in advance for shared wisdom on these technical points, and for your patience.

My Dad died on 22 July 2025.  So I gather any gifts he made prior to 22 July 2018 are exempt.  Certainly IHT will be payable. Relief for gifts out of surplus income is not available in my Dad’s situation. I am aware that HMRC’s guidance notes do not grant any separate concession for birthday or Christmas gifts, so I won’t try on anything like that.

Dad made me a £250 birthday gift on 21 May 2018 and a £250 Christmas gift on 24 December 2018. He also made two £7000 gifts to another family member: one on 1 November 2017 and one on 1 November 2018. There were no other gifts during the 2017/2018 and 2018/2019 tax years.

Question 1:

Dad’s total gifts to me in the 2018/2019 tax year amounted to £500, i.e. two gifts of £250 each.  Ordinarily the £250 exempt amount applies per recipient per tax year.  Can I just disregard the first gift, because that occurred more than seven years before his death?  In that case, if only the second £250 gift is in scope for IHT, then is that gift exempt under the £250 rule?  I assume I’ve got this right, please confirm.

Question 2:

I assume the £3000 annual exemption for the 2018/2019 tax year can be applied to reduce (for IHT purposes) the £7000 gift on 1 November 2018. Could I also reduce that same £7000 further, by bringing forward the £3000 annual exemption from the 2017/2018 tax year?  It is true that Dad  made a £7000 gift in the 2017/2018 tax year, which in general would have fully used up the £3000 annual exemption for that tax year.  However, should that earlier gift anyhow be wholly disregarded for IHT, as it was made more than seven years before his death?   Alternatively, if that earlier gift cannot be disregarded, then aren’t gifts made more than seven years before death continuing to affect the running total for IHT, despite of the seven year rule?

Keep_pedalling

Are you 100% sure his estate is in IHT territory? What is the total value of his estate? What was his marital status? 

I think you can ignore the birthday and Christmas gifts, £250 is not an unreasonable amount to give on those occasions. £6k of the £7k gift would be coved by his annual exemption leaving a £1k failed PET. 

JamesRobinson48

Keep_pedalling said:

Are you 100% sure his estate is in IHT territory? What is the total value of his estate? What was his marital status? 

I think you can ignore the birthday and Christmas gifts, £250 is not an unreasonable amount to give on those occasions. £6k of the £7k gift would be coved by his annual exemption leaving a £1k failed PET. 

Thanks for quick feedback. Dad was widowed, his estate is a long way into seven figures, and there are minimal charitable bequests. So yes I am 100% sure.

On what grounds do you believe I can ignore the birthday and Christmas gifts?  HMRC's £250 per year per recipient rule appears entirely unambiguous. Implicitly it is intended to accommodate small seasonal or celebratory gifts. For example: is there a published extra-statutory concession?; do HMRC investigations of IHT returns never attack this point?; or is the approach you propose universally adopted by practitioners? (I don't get that impression).  I'm accountable to HMRC as executor, therefore I'd like to be scrupulously compliant  on everything, rather than try to nudge the IHT bill down slightly or (by leaving loose ends) tempt them to dig deeper into other areas. 

poseidon1

JamesRobinson48 said:

Keep_pedalling said:

Are you 100% sure his estate is in IHT territory? What is the total value of his estate? What was his marital status? 

I think you can ignore the birthday and Christmas gifts, £250 is not an unreasonable amount to give on those occasions. £6k of the £7k gift would be coved by his annual exemption leaving a £1k failed PET. 

Thanks for quick feedback. Dad was widowed, his estate is a long way into seven figures, and there are minimal charitable bequests. So yes I am 100% sure.

On what grounds do you believe I can ignore the birthday and Christmas gifts?  HMRC's £250 per year per recipient rule appears entirely unambiguous. Implicitly it is intended to accommodate small seasonal or celebratory gifts. For example: is there a published extra-statutory concession?; do HMRC investigations of IHT returns never attack this point?; or is the approach you propose universally adopted by practitioners? (I don't get that impression).  I'm accountable to HMRC as executor, therefore I'd like to be scrupulously compliant  on everything, rather than try to nudge the IHT bill down slightly or (by leaving loose ends) tempt them to dig deeper into other areas. 

Appreciate your desire to be100% scrupulous in your reporting ( not everyone's priority ).

To keep your reporting at its simplest, all gifts made by your father ( regardless of quantum) prior to 21st July 2018 are wholly exempt under the  all encompassing 7 year  PET survival rule, so only concern yourself with gifting after that milestone.

On that basis, only your 2nd birthday gift is in point ( exempt under small gifts for that year), and the second £7,000 gift ( mostly) exempt per Keep_pedalling.

Best way to look at it is the PET regime wipes clean all gifts subject to surviving 1 day past 7 years - I think HMRC puts this more succinctly below -

https://www.gov.uk/inheritance-tax/gifts#:~:text=No tax is due on,as the 7 year rule.

JamesRobinson48

Thanks all, very prompt and clear.  In due course, doubtless I'll be asking other questions.