Inheritance tax query

[CYNthesys]

If someones estate is below the inheritance tax limit of £325,000 can they give away more than £3000 per year. Does the £3000 rule only apply to estates over £325,000?

[Peridot]

Re: Inheritance tax query

Hi,
I think you are referring to the annual exemption of £3,000 which applies to every one irrespective of their estate size. From the Gov't website: https://www.gov.uk/inheritance-tax/gifts
'Exempted gifts. You can give away £3,000 worth of gifts each tax year (6 April to 5 April) without them being added to the value of your estate. This is known as your 'annual exemption'. You can carry any unused annual exemption forward to the next year - but only for one year.'
Hope this helps?

[CYNthesys]

Re: Inheritance tax query

Im trying to clarify if say a widower has savings and assets of eg £100,000 and he decides to share eg £80,000 of it between his 2 children less than 7 years before he dies, would the £80,000 he gave away be added to his remaining £20,000 to form the value of his estate.
Does it matter that he has given away more that the £3000 as his estate would be under the £325,000 threshold anyway

[Peridot]

Re: Inheritance tax query

Hi,
The 7 year Potentially Exempt Transfer Rule (PET) is separate to the Annual Personal Allowance Rule. As a gift over the £3,000 was made in the 7 years prior to the death depending on the amount of the gift and whether by including the gift inheritance tax becomes payable it may become necessary to complete an IHT400 form, instead of the IHT205 (excepted estates form).
On the IHT205 the first page has tick boxes to answer various questions including were any gifts made in the 7 years prior to the death. If those gifts were over £150,000 (even if there will still be no inheritance tax to pay) then an IHT400 needs to be completed.
If the gifts were below £150,000 in the 7 years prior to death then the IHT205 for excepted estates can still be completed.
Here's the IHT205 see question 2 https://www.gov.uk/government/upload...T205_2011_.pdf
This link may be useful and there is also the helpline that you can contact if needs be regarding the IHT position: https://www.gov.uk/inheritance-tax/gifts