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Sam, Accountant
Category: Tax
Satisfied Customers: 14154
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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GreetingsI am preparing a pack-up for eventual use by my

Customer Question

I am preparing a pack-up for eventual use by my Executors.
My Estate is not complicated and I can complete examples of Forms IHT205 and PA1 except
IHT205 9.1 about gifts of cash. I know that there are several tax exemption categories each with value limits but I have been unable, even from the IHT206 and IHT Help Line, to get a clear answer to the question: Is the Annual Exemption of £3000 a total combined annual maximum or can exemptions under the other categories be added to it?
Submitted: 4 years ago.
Category: Tax
Expert:  Sam replied 4 years ago.

Thanks for your question, My name is Sam and I am one of the UK tax experts here on Just Answer.

The different combinations are in addition to - see here link from HMRC website to clarify which states
Annual exemption

You can give away gifts worth up to £3,000 in total in each tax year and these gifts will be exempt from Inheritance Tax when you die. You can carry forward any unused part of the £3,000 exemption to the following year, but if you don't use it in that year, the carried-over exemption expires.

In addition to the annual exemption there are other exemptions for certain types of gifts. These are explained below.

And the additional gifts that can be made are

Exempt gifts

Some gifts made during your lifetime are exempt from Inheritance Tax because of the type of gift or the reason for making it.

Wedding gifts/civil partnership ceremony gifts

Wedding or civil partnership ceremony gifts are exempt from Inheritance Tax, subject to certain limits:
•parents can each give cash or gifts worth £5,000
•grandparents and great grandparents can each give cash or gifts worth £2,500
•anyone else can give cash or gifts worth £1,000

You have to make the gift - or promise to make it - on or shortly before the date of the wedding or civil partnership ceremony. If the ceremony is called off and you still make the gift - or if you make the gift after the ceremony without having promised it first - this exemption won't apply.

Small gifts

You can make small gifts up to the value of £250 to as many individuals as you like in any one tax year. However, you can't give more than £250 and claim that the first £250 is a small gift. If you give an amount greater than £250 the exemption is lost altogether.

You also can't use your small gifts allowance together with any other exemption when giving to the same person.

Regular gifts or payments that are part of your normal expenditure

Any regular gifts you make out of your after-tax income, not including your capital, are exempt from Inheritance Tax. These gifts will only qualify if you have enough income left after making them to maintain your normal lifestyle.

These include:
•monthly or other regular payments to someone
•regular gifts for Christmas and birthdays, or wedding/civil partnership anniversaries
•regular premiums on a life insurance policy - for you or someone else

You can also make exempt maintenance payments to:
•your husband, wife or civil partner
•your ex-spouse or former civil partner
•relatives who are dependent on you because of old age or infirmity
•your children, including adopted children and step-children, who are under 18 or in full-time education

I hope that clarifies matters for you - so just to recap
£3000 in total in any one year for any reason (but if you did not make any gifts the previous tax year - then the £3000 can be carried over once allowing total amount of £6000 to be gifted with exemption)
PLUS in addition
Wedding gifts
Small Gifts
Regular gifts
maintenance payments