IHT - Lifetime Exemptions/Reliefs Flashcards
(18 cards)
What exemptions and reliefs apply only to lifetime transfers (not to the death estate)?
- Annual exemption
- Family maintenance exemption
- Small gifts exemption
- Marriage exemption
- Normal expenditure from income exemption
- Taper relief (only post-death, for failed PETs and LCTs)
What is the value of the annual exemption (AE)?
£3,000 per tax year.
How can unused AE from the previous year be used?
It may be carried forward one year only, but current AE must be used first.
What is the maximum AE that can be applied to a single transfer?
£6,000, if no gifts were made in this or the previous tax year.
To whom can exempt maintenance payments be made?
- A spouse or former spouse (e.g. via divorce settlement)
- A minor child (or over 18 in full-time education)
- A dependent relative for their reasonable care
What is the limit for the small gifts exemption per recipient?
Up to £250 per recipient per tax year.
Can AE and the small gifts exemption be used for the same person?
No—not in combination. If total gifts to someone exceed £250, the small gifts exemption doesn’t apply at all.
Is there a limit on the number of people who can receive £250 gifts?
No—the exemption applies to unlimited recipients.
What are the marriage exemption limits per donor?
- £5,000 for a parent
- £2,500 for a grandparent or party to the marriage
- £1,000 in all other cases
Can the marriage exemption be used alongside the annual exemption?
Yes—they can be claimed together for the same gift.
What are the conditions for the normal expenditure out of income exemption?
- Made from income (not capital)
- Part of a settled pattern or intention to make regular gifts
- Does not affect the donor’s standard of living
Is there a limit to the value of normal expenditure out of oncome exemption?
No—it is unlimited, provided the conditions are met.
When does taper relief apply? Post-Death Only
If a PET or LCT becomes taxable and the donor died 3–7 years after the gift.
Does taper relief reduce the value of the transfer?
No—it reduces the amount of IHT due, not the value of the gift.
What is the effect of taper relief on a zero tax liability?
None—taper relief only applies if IHT is payable.
What is the taper relief reduction if death occurs 3–4 years after the gift?
20% reduction in tax (80% payable).
What is the reduction if death occurs 6–7 years after the gift?
80% reduction in tax (20% payable).
