Inheritance Tax Annual Exemption Question

13paul13

Good evening.

My mum and dad want to gift my sister a total of £4,500, which is more than the £3,000 annual exemption.

Am I right that they both get £3,000 annual exemption, so technically have £6,000 they can gift between them (up to £3,000 each), without it falling into potential Inheritance Tax later down the line? (As they’re married, they don’t lose that and only have a combined £3,000 total limit?)

So my mum can say that £2,250 was from her, and my dad say that £2,250 was from him. So, if they should unfortunately both die within 7 years of gifting it, it wouldn’t be taken into consideration for Inheritance Tax (assuming the estate is above the threshold anyway)?

They have all of their money in joint accounts, if that makes any difference to things?

DRS1

There is some information on this page

How Inheritance Tax works: thresholds, rules and allowances: Rules on giving gifts - GOV.UK

Note that you may be able to carry forward the relief if you don't use it one year so they may each have £6k this year if they made no gifts last year.

Keep_pedalling

Yes they each have an exemption and if they made no gifts in the previous tax year they came make a joint gift of £12k as you can carry over the previous year’s exemption. if they gift by the 5th April they can gift another £6k on the 6th.

vacheron

You are probably already aware of this, but many aren't so I think it's worth mentioning:

If your parents are married and intend to give their main residence to their direct decedents, their total estate would have to exceed £1 million before IHT (and therefore the annual exemption) becomes an issue.

I only mention this because about 80% of the people I talk to think the threshold is £325k because this is the figure which is banded about in the press / news almost all of the time.

13paul13

Thanks for your replies. It’s going to be a bank transfer coming out of a joint account - would it be best to split it into two payments made straight after the other of £2,250 - one with reference “Gift from mum”, the other “Gift from dad”? That way the bank statement makes their intentions clear. Or is it ok to pay the full £4,500 in one payment with reference “Gift” and just keep a written record of it that they both gifted £2,250 each?

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/81947730#Comment_81947730

You need to work out whether their estate is ever likely to be liable to IHT, considering as the previous poster it might wel have to be above a Million Pounds.

If it is not likely to be close to that, they can forget about £3K allowances and who sends what etc, as it will never be an issue.