IHT - Potentially Exempt Transfers

Cbjroms

My understanding of the “7-year rule" is that all gifts made by the deceased in the 7 years prior to death must be declared to HMRC The total of all gifts (excluding specific exemptions) are then subject to IHT albeit taper relief may apply.

It has been suggested to me - albeit I cannot find this stated anywhere - that the maximum PETs at any point in a 7 year period must be less than my Nil Rate Band for IHT.

My question is whether there is such a limit on PETs or is it just that such gifts remain part of the estate for IHT purposes if the "7 Year Rule" applies?

Albermarle

To make things simple lets say you are a single person with no children, so you have a nil rate band of £325K

If you give away £300K say and die within 7 years, the whole £300K is counted back into your estate ( no taper relief)

If you give away say £500K and die within 7 years. Then £325K is counted back into your estate.  £175K is subject to IHT, but can benefit from taper relief depending on when you died. In theory the tax is due from the receiver of the gift, but HMRC are not fussy about the source and it is usually paid by the estate.

Currently there is no limit to the size of gifts/PETs you can make, although there was some speculation about this before the last budget.