Buy car to reduce IHT?

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Littlefraggle
Littlefraggle Posts: 2 Newbie
in Cutting tax
Query? If my estate is more than the IHT threshold, could I buy two cars for my children as I understand cars are chattels and do not fall under the estate valuation?

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  • Tom99
    Tom99 Posts: 5,371 Forumite
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    Cars you own are valued just like any other asset for IHT purposes.
    You could buy two cars for your children or just give them the equivalent in cash, the effect would be the same.
    They will be treated as a PET gift if over the annual allowance of £3,000 of £6,000 if you did not use last years allowance.
    If you have a spouse/civil partner remember you each have this annual allowance so potentially can gift up to £12,000 IHT free.
  • Littlefraggle
    Littlefraggle Posts: 2 Newbie
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    Thanks Tom. So are cars then not chattels? My lawyer is giving us rather poor advice. She stated only investment vehicles count towards the estate as normal cars are wasting assets.
  • Tom99
    Tom99 Posts: 5,371 Forumite
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    Littlefraggle wrote: »
    Thanks Tom. So are cars then not chattels? My lawyer is giving us rather poor advice. She stated only investment vehicles count towards the estate as normal cars are wasting assets.
    Your lawyer obviously does not know much about IHT, please do not take any further advice from her on IHT.
    When you die everything you own is part of your estate for IHT, cars, bikes, chattels (whatever they are) pots and pans even.
  • Keep_pedalling
    Keep_pedalling Posts: 16,636 Forumite
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    If want your estate to avoid IHT he best way is to enjoy yourself and splash some cash yourself. If you want to make gifts then gift cash so they can do what they want with it.

    If you are well into IHT territory then you should be taking advice from an IFA not a solicitor.
  • uknick
    uknick Posts: 1,625 Forumite
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    Littlefraggle wrote: »
    Thanks Tom. So are cars then not chattels? My lawyer is giving us rather poor advice. She stated only investment vehicles count towards the estate as normal cars are wasting assets.

    I wonder if she is thinking of capital gains tax? If so, another vote from me to take your business elsewhere for tax purposes.
  • Linton
    Linton Posts: 17,172 Forumite
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    In any case its the value of the gift that counts, not the "currency" used. Whether something is regarded as chattels would only be relevent if they were your property when you died.
  • jimmo
    jimmo Posts: 2,281 Forumite
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    Littlefraggle wrote: »
    Thanks Tom. So are cars then not chattels? My lawyer is giving us rather poor advice. She stated only investment vehicles count towards the estate as normal cars are wasting assets.

    For your information
    Chattels are tangible, moveable objects so cars are chattels.
    https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg76550
    Wasting assets are things with a normal life expectancy of less that 50 years so cars are wasting assets.
    https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg76700
    There are special rules for Capital Gains tax purposes for chattels that are wasting assets which normally mean that cars are exempt from Capital Gains Tax but there is no point in going into them here.
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