It’s not true that inheritance tax (IHT) is only due when you die. Capital gifts during your lifetime can be subject to IHT at the rate of 20%, unless the recipient is exempt or the gift is covered by a separate exemption. There are exemptions for gifts made to political parties, charities and housing associations and for gifts used for a national purpose or for the maintenance of historic buildings. Gifts which don’t qualify for an exemption include those to hospitals which are not registered as a charity, those to charities which are registered outside the EU and those to political lobbying movements.
Lifetime gifts are not chargeable to IHT where they fall within your annual exemption of £3,000. If you don’t use all this exemption in one tax year, you can roll-over the unused amount to the next year, but not beyond. Now is a good time to review the gifts you have made during the tax year.
Small gifts of up to £250 per person per annum are exempt; so are regular gifts which amount to normal expenditure out of your income. Your nil rate band of £325,000 can cover gifts made in the last seven years which are not specifically exempt.
Capital gifts over your available nil rate band are potentially subject to IHT; it largely depends on who has received the gift.