Gifts liable to IHT

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.