Gifts during Lifetime can be exempt from Inheritance Tax (IHT), potentially exempt or be a chargeable lifetime transfer:
Exempt Gifts
- Unlimited between spouses/civil partners
- £3,000 annual exemption (can carry forward for 1 year max)
- Gifts out of normal expenditure (must be able to maintain standard of living)
- Gifts on marriage (£1,000 to anyone, £2,500 to a grandchild, £5,000 to a child)
- Gifts to help with another persons's living costs i.e. childcare and elderly relatives
- £250 to any amount of people
- Gifts to registered charities and political parties - unlimited
Potential exempt transfers (PETs)
- Gifts to individuals
- Gifts into bare/statutory trusts and trusts for vulnerable beneficiaries
- NB: These will be fully exempt of IHT if the person gifting survives 7 years. If the death occurs within 7 years they will either be chargeable or use up the Nil Rate Band (£325,000)
Chargeable lifetime transfers (CLTs)
- Any gift that does not fall into the above two categories is a CLT
- For example gifts into discretionary trusts
- NB: If these gifts were in excess of the available Nil Rate Band there will be a 20% lifetime tax charge. If they survive 7 years, there is no further tax to pay
4 March 2019
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