Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@. Skimlinks & other affiliated links are turned on

Search
  • FIRST POST
    • Woolington
    • By Woolington 18th Aug 19, 1:46 PM
    • 71Posts
    • 1Thanks
    Woolington
    Gifts and IHT
    • #1
    • 18th Aug 19, 1:46 PM
    Gifts and IHT 18th Aug 19 at 1:46 PM
    Hi all,
    my dad left 1,000 to each of his eight grandchildren 2 years before he died. It was a gift for each.

    The solicitor says we will have to pay inheritance tax on it - will that be 40% of each 1,000 or is it taken as a collective amount - 8,000 and IHT charged just on the remaining 5,000?

    Thanks in anticipation!
Page 1
    • frugalmacdugal
    • By frugalmacdugal 18th Aug 19, 1:51 PM
    • 6,747 Posts
    • 5,752 Thanks
    frugalmacdugal
    • #2
    • 18th Aug 19, 1:51 PM
    • #2
    • 18th Aug 19, 1:51 PM
    Hi,


    sorry, don't understand the '8,000 and IHT charged just on the remaining 5,000?', tax is only due on estates over 325000.
    Y'all take care now.
    • Savvy_Sue
    • By Savvy_Sue 18th Aug 19, 2:19 PM
    • 40,028 Posts
    • 37,367 Thanks
    Savvy_Sue
    • #3
    • 18th Aug 19, 2:19 PM
    • #3
    • 18th Aug 19, 2:19 PM
    Also iht is usually paid by the estate before the bequests are paid out. What wording was used?
    Still knitting!
    Completed: TWO adult cardigans, 3 baby jumpers, 3 shawls, 1 sweat band, 3 pairs baby bootees, 2 sets of handwarmers, 1 Wise Man Knitivity figure + 1 sheep, 2 pairs socks, 3 balaclavas, multiple hats and poppies, 3 peony flowers, 4 butterflies ...
    Current projects: pink balaclava (for myself), seaman's hat, about to start another cardigan!
    • 74jax
    • By 74jax 18th Aug 19, 2:22 PM
    • 5,136 Posts
    • 7,195 Thanks
    74jax
    • #4
    • 18th Aug 19, 2:22 PM
    • #4
    • 18th Aug 19, 2:22 PM
    Why just 5k?

    The recipient doesn't pay this, it usually comes from the estate.
    Forty and fabulous, well that's what my cards say....
    • getmore4less
    • By getmore4less 18th Aug 19, 2:24 PM
    • 37,233 Posts
    • 22,967 Thanks
    getmore4less
    • #5
    • 18th Aug 19, 2:24 PM
    • #5
    • 18th Aug 19, 2:24 PM
    why?

    Is the estate a large one.

    if they were the only gifts in the last 3 years then they can use 2 3k exemptions leaving 2k that reduces the nil rate band to 323k

    Then the estate pay tax using that allowance.


    (the 5k is probably using just 1 3k annual exemption)
    • Keep pedalling
    • By Keep pedalling 18th Aug 19, 4:50 PM
    • 6,896 Posts
    • 8,085 Thanks
    Keep pedalling
    • #6
    • 18th Aug 19, 4:50 PM
    • #6
    • 18th Aug 19, 4:50 PM
    Any IHT due comes out of the estate, the only time it has to be paid by the recipients of gifts is if so much has been given away that there is insufficient assets left in the estate to pay the tax.

    If they were the only gifts given in that tax year then 3000 of it will be exempt, 6000 if the previous year’s exemption can be carried over because no gifts were made in that year either.
    • xylophone
    • By xylophone 18th Aug 19, 5:36 PM
    • 30,978 Posts
    • 19,141 Thanks
    xylophone
    • #7
    • 18th Aug 19, 5:36 PM
    • #7
    • 18th Aug 19, 5:36 PM
    my dad left 1,000 to each of his eight grandchildren 2 years before he died. It was a gift for each.
    Do you mean that two years before he died, your grandfather gave each of his grandchildren 1000?

    He had a gift allowance of 3000 in the year he gave the money and could carry forward 3000 from the year before if he had not used it then.


    Or do you mean that in a will made two years before he died, your grandfather left each of his eight grandchildren 1000?

    Are you saying that the value of your grandfather's estate exceeds his nil rate band (plus any transferable nil rate band he may have had, plus any family home allowance/transferable family home allowance)?
    • SeniorSam
    • By SeniorSam 19th Aug 19, 6:23 AM
    • 1,338 Posts
    • 691 Thanks
    SeniorSam
    • #8
    • 19th Aug 19, 6:23 AM
    • #8
    • 19th Aug 19, 6:23 AM
    You have not said, but if your Mum died first and left everything to your Dad, when Dad died, there was an IHT allowance of 325 each (650,000). A;so if they owned a home, then there would also be Residence allowance, so the estate would need to be large to have IHT to pay, If any solicitor can not explain to their clients how taxes work, then he/she should not be in practice.
    I'm a retired IFA who specialised for many years in Inheritance Tax, Wills and Trusts. I cannot offer advice now, so my comments are just meant to be helpful.
    • Woolington
    • By Woolington 19th Aug 19, 12:35 PM
    • 71 Posts
    • 1 Thanks
    Woolington
    • #9
    • 19th Aug 19, 12:35 PM
    • #9
    • 19th Aug 19, 12:35 PM
    Hi all, sorry! I didn't know about the 3K x 2 allowance carried over to the next tax year so I can see that my question won't make sense...

    (the 5k is probably using just 1 3k annual exemption) yes! so will the 40% be only on 2,000?

    You have not said, but if your Mum died first and left everything to your Dad, when Dad died, there was an IHT allowance of 325 each (650,000). A;so if they owned a home, then there would also be Residence allowance, so the estate would need to be large to have IHT to pay,

    yes, this is the scenario! The solicitor had managed to get everything under the 650,000 tax threshold, it's a shame the grandkids gifts will be taxed - so am I to understand that the tax comes out of the estate, evenly between the beneficiaries - I only ask because my brother doesn't have any children.

    Thank you for making sense of my non sensical question!
    Last edited by Woolington; 19-08-2019 at 12:37 PM. Reason: I used underline instead of italics
    • Keep pedalling
    • By Keep pedalling 19th Aug 19, 1:34 PM
    • 6,896 Posts
    • 8,085 Thanks
    Keep pedalling
    Hi all, sorry! I didn't know about the 3K x 2 allowance carried over to the next tax year so I can see that my question won't make sense...

    (the 5k is probably using just 1 3k annual exemption) yes! so will the 40% be only on 2,000?

    You have not said, but if your Mum died first and left everything to your Dad, when Dad died, there was an IHT allowance of 325 each (650,000). A;so if they owned a home, then there would also be Residence allowance, so the estate would need to be large to have IHT to pay,

    yes, this is the scenario! The solicitor had managed to get everything under the 650,000 tax threshold, it's a shame the grandkids gifts will be taxed - so am I to understand that the tax comes out of the estate, evenly between the beneficiaries - I only ask because my brother doesn't have any children.

    Thank you for making sense of my non sensical question!
    Originally posted by Woolington
    No those gifts will not be taxed, any IHT comes out of the residual estate not from gifts made 2 years ago.

    What about the residential nil rate band? Presuming with that size of estate he owned a home which adds another 300k of nil rate band.
    • Woolington
    • By Woolington 23rd Aug 19, 8:15 AM
    • 71 Posts
    • 1 Thanks
    Woolington
    Hi,
    sorry! I'm really confused about IHT. The 8 x 1,000 gifts were to be 'incorporated into the IHT forms.' (solicitor)

    The solicitor reckons to have got away with no IHT to pay using my mum's nil rate band allowance as well as my dad's...

    So they won't come after the children!
    • pphillips
    • By pphillips 23rd Aug 19, 12:24 PM
    • 601 Posts
    • 410 Thanks
    pphillips
    Assuming the annual gift allowances were used up, the grandchildren would only ever have to pay IHT if the gifts to them had been worth over 650,000.

    Otherwise, the deceased's estate pays the IHT.

    IHT is only paid if the taxable estate comes to more than the available nil rate band.
    Last edited by pphillips; 23-08-2019 at 12:38 PM.
    • frugalmacdugal
    • By frugalmacdugal 23rd Aug 19, 3:28 PM
    • 6,747 Posts
    • 5,752 Thanks
    frugalmacdugal
    Hi,


    well my simple understanding of IHT is:


    the taxman gets the first hit, 40% if over 325/650K.


    After that the beneficiaries get their share with no tax to pay.
    Last edited by frugalmacdugal; 23-08-2019 at 3:35 PM.
    Y'all take care now.
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

3,302Posts Today

8,474Users online

Martin's Twitter