IHT Lifetime Exemptions and Reliefs

Question 1

What is the maximum Annual Exemption (AE) available for lifetime gifts if no gifts were made last year?
A. £6,000
B. £3,000
C. £12,000
D. £9,000

Answer 1

A – £6,000
Explanation:
If no gifts were made in the previous tax year, £3,000 from last year plus £3,000 from this year are available = £6,000 total.

Question 2

The small gifts exemption allows a donor to give up to how much per individual per tax year?
A. £500
B. £250
C. £1,000
D. £3,000

Answer 2

B – £250
Explanation:
The small gifts exemption allows giving up to £250 per recipient per tax year, with no limit on the number of recipients.

Question 3

A father gifts £5,000 to his daughter on her marriage. What exemptions apply?
A. £3,000 AE only
B. £5,000 marriage exemption only
C. £3,000 AE and £2,000 marriage exemption
D. £5,000 marriage exemption and £3,000 AE

Answer 3

D – £5,000 marriage exemption and £3,000 AE
Explanation:
Marriage exemption covers £5,000 for a parent. AE can also be used separately if a further gift is made.

Question 4

Sarah gives £300 to each of 20 grandchildren at Christmas. Which exemption applies?
A. Small gifts exemption
B. Annual exemption
C. Both exemptions
D. Neither exemption

Answer 4

D – Neither exemption
Explanation:
Each gift exceeds £250 so small gifts exemption is not available. AE could apply but not automatically to multiple small gifts.

Question 5

If a donor survives 5 years after making a PET, how much IHT remains payable after applying taper relief?
A. 20%
B. 40%
C. 60%
D. 80%

Answer 5

B – 40%
Explanation:
Between 5 and 6 years, 40% of the full IHT remains payable after taper relief.

Question 6

Under the family maintenance exemption, who can benefit from exempt maintenance gifts?
A. Minor children only
B. Spouse, minor children and dependent relatives
C. Grandchildren only
D. Only full-time working children

Answer 6

B – Spouse, minor children and dependent relatives
Explanation:
Maintenance payments for spouses, minor children (or adult children in education), and dependent relatives are exempt.

Question 7

What happens if an LCT is made 8 years before death?
A. Reassessed and tapered
B. Exempt from any reassessment
C. Chargeable at death rate
D. Taxed as if made 5 years before death

Answer 7

B – Exempt from any reassessment
Explanation:
An LCT made more than 7 years before death is outside the charge — no reassessment or taper.

Question 8

For normal expenditure out of income exemption to apply, what must be true?
A. Gift must be made from capital
B. Gift must be occasional
C. Gift must not reduce standard of living
D. Gift must be greater than £1,000

Answer 8

C – Gift must not reduce standard of living
Explanation:
To qualify, the gifts must be from income and not reduce the donor’s usual lifestyle.