Did you know that you can make gifts during your lifetime that can affect the inheritance tax (IHT) payable on death? The rule is; gifts by one individual to another during the seven years before they die become liable to IHT.
Completing IHT forms requires executors to look through the deceased’s financial records for at least seven years before the death to look for gifts. These are then recorded on the IHT forms, specifically the IHT403.
On the IHT403, HMRC states “Do not tell us about any gifts where the total value was £3,000 or less in any tax year, small amounts of £250 or less”, however if cash gifts of £3,000 or less are ignored, then the “normal expenditure out of income” exemption will be overlooked (This exemption must be “normal expenditure” which means that it must be gifts that form a pattern over multiple years). This means that HMRC will be demanding IHT that it wasn’t entitled to!
This can get quite confusing, let us look over your IHT form or set up a plan to ensure you get the “normal expenditure out of income” exemption! Give us a call on 01622 738165 today!