Exemptions and Reliefs - Lifetime Only Flashcards
What are the lifetime only exemptions and reliefs?
1) Annual exemption
2) Family maintenance exemption
3) Small gifts exemption
4) Marriage exemption
5) Normal expenditure from income
6) Taper relief
What is the annual exemption?
£3,000 per tax year
What is the tax year?
6 April to 5 April
Can you carry forward unused Annual Exemption?
Yes, only the previous year’s unused allowance
Can you pick which gifts Annual Exemption apply to?
No, it is applied chronologically
What is the effect of Annual Exemption?
Reduces the Chargeable Value
What are family maintenance exemption?
Exempts reasonable payments to spouse, children, dependent relatives
What are examples of exempt reasonable payments to family?
1) Divorce settlements, 2) Money to children studying, 3) Money to elderly parents
What is a small gifts exemption?
Gifts up to £250 are exempt
How is small gifts exemption lost?
If more than £250 is given to one person in a tax year, the whole exemption is lost
What is the marriage exemption?
Gifts for marriage are exempt up to a certain amount
What are the different donors and rates for marriage exemption?
1) £5,000 – parent, 2) £2,500 – grandparent, 3) £1,000 – any other person
Can marriage exemption be used in addition to AE?
Yes
What is the rule on marriage exemption?
It must be related to a specific marriage
What is a normal expenditure out of income?
Gift must be:
1) Made from income (not capital)
2) Part of a regular pattern
3) Not affect donor’s standard of living
What is the taper relief?
1) 3-4 years – 20%, 2) 4-5 years – 40%, 3) 5-6 years – 60%, 4) 6-7 years – 80%, 5) 7+ years – 100%
Why do lifetime exemptions and reliefs matter?
They reduce IHT and preserve nil rate band
