inheritance tax on lifetime gifts

Question 1

What is a lifetime gift

Answer 1

certain gifts made during lifetime. tax paid on LGs given away 7 years before death.

Question 2

what are the 2 types of lifetime gift

Answer 2

potentially exempt transfer (PETs) and Lifetime Chargeable Transfers (LCTs)

Question 3

What is a potentially exempt transfer?

Answer 3

things such as outright gifts given in previous 7 years.
gifts of £250 or less are exempt.
exemptions also apply to spending on things like supporting child at uni and certain wedding gifts.

Question 4

Basic IHT info for lifetime gifts - when are they taxed?

Answer 4

taxed if death taxes place within 7 years (not at time of gift being made) at usual rates and uses up NRB BEFORE death estate.

Question 5

What exemptions can apply to PETs?

Answer 5

• usual exemptions eg gift to spouse
• lifetime gift annual exemption of £3k can be applied, can carry forward 1 years unused annual exemption so £6k max can be exempt.
• tapering relief can apply if lived for set no of yrs after gift - 3-4yrs=80%, 4-5 = 60%, 5-6=40%, 6-7=20% (of the taxable amount is payable)

Question 6

what is a lifetime chargeable transfer

Answer 6

certain transfers of assets into trusts or companies

Question 7

How/when are LCTs taxed

Answer 7

at time of transfer (unlike PET) - 0% below NRB, 20% above

uses up death estate NRB

Question 8

what happens if a donor dies within 7 years of an LCT?

Answer 8

Subject to IHT again - 0 below NRB 40% above, not just the initial 20%

Question 9

exemptions for LCTs

Answer 9

Usual exemptions and reliefs apply,