Where this fits
We can calculate the inheritance tax your estate would pay today.
Sunny Bharj
Independent Financial Adviser
Tony Springer
Independent Financial Adviser
A gift that is not otherwise exempt falls out of your estate completely if you survive seven years from making it. Die within that period and it comes back into the calculation.
It is brought into the inheritance tax calculation at its value when it was made.
Gifts are set against the nil rate band before the rest of the estate is, in the order they were made, which leaves less of the band for the rest of the estate.
Where the gift is covered by the available nil rate band, no tax is payable on the gift.
The tax is charged at 32% instead of 40% on a gift made three to four years before death, 24% at four to five, 16% at five to six and 8% at six to seven.
It reduces the tax otherwise payable on the gift. HMRC states this plainly in its own manual.
So a £50,000 gift made five years before death, sitting comfortably inside a £325,000 nil rate band, has no tax on it. There is nothing for taper relief to reduce. Guidance suggesting you save 16% by surviving five years is describing a case where the gift itself exceeds the band.
Gifts made in the seven years before death are set against the nil rate band before the rest of the estate, oldest first.
Yes, from the date the gift is made.
Each has its own seven year clock. They are set against the nil rate band in the order they were made, oldest first.
Primarily the person who received it, though the estate can end up bearing it. Somebody given a large sum can face a bill years later, so tell them when you make the gift.
There is a longer look-back where gifts into certain trusts are involved, because those are chargeable at the time they are made. For ordinary gifts to people, seven years is the period.
We can calculate the inheritance tax your estate would pay today.
Independent Financial Adviser
Independent Financial Adviser
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