IHT - Lifetime Flashcards
What are the two main types of lifetime transfers?
1) Potentially exempt transfers (PETs)
2) Lifetime chargeable transfers (LCTs).
What are potentially exempt transfers?
Gifts to individuals.
What are lifetime chargeable transfers?
Gifts into trusts.
Is PET chargeable at the time of gift?
No.
Is PET chargeable if donor dies within 7 years?
Yes.
Is LCT chargeable at the time of gift?
Yes, at 20% if above the NRB.
Is LCT chargeable if donor dies within 7 years?
Yes, reassessed at 40%.
When is LCT chargeable immediately?
If the value is above the nil rate band, it’s taxed at 20%.
Steps to calculate IHT on lifetime transfers?
1) Calculate cumulative total
2) Identify value transferred
3) Apply exemptions/reliefs
4) Apply NRB & IHT
5) Apply Taper Relief
6) Credit for tax paid on LCTs.
How do you calculate cumulative total?
Add all chargeable transfers made in last 7 years.
What is the value transferred in lifetime gift?
The value of the gift representing the loss to donor’s estate (value at the TIME of transfer).
What are the exemptions and reliefs?
1) Spouse exemption
2) Charity exemption
3) £3,000 annual exemption
4) Wedding gift exemption
5) Business/agricultural relief.
What is the Nil Rate Band?
£325,000.
Does NRB apply to LCT?
Yes, if the transfer is below the threshold.
What is taper relief?
Reduces IHT payable from 3–7 years after the gift. 20% to 0%.
What is giving credit for tax already paid on LCTs?
If 20% was paid, only the difference up to 40% is payable on death.
When working out cumulative total of someone that is alive, do PETs count?
No, because the person hasn’t died yet.
