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bigduckontax, Accountant
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IHT Question My mother has given away a total of £374k since

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IHT Question
My mother has given away a total of £374k since 2013.
This comprises
-£100k PET each (in Sep 2014) to three siblings; total £300k
- Small annual gifts and monthly gift from income ; total £74k.
Her total nil rate allowance , on death , will be £650k as she will gain my fathers allowance.As this gift total is greater than £325k will, on death at this time , each sibling be liable for IHT or would the estate pay?Note: The expected estate value (as of today) is £726k inclusive of the £300k.Thankyou
Norman F

Hello Norman, I am one of the experts on Just Answer and pleased to be able to help you with your question.

There is commonly held misconception that beneficiaries are liable to Inheritance Tax (IHT). They are not, save for PETs, The deceased's estate is liable and if there are insufficient funds to meet IHT then the Revenue loses out.

The PETs run off at a taper over seven years and in the event of a decease within this time are added back to the estate for IHT. If the estate is insufficient to meet the tax on the PET, and PETs are the first to suffer IHT, then the liability cascades down to the beneficiary for immediate payment.

IHT is at 40% flat rate so on an estate of 726K then 126K is exposed to the tax, ie a tad over 50K.

I do hope that you have found my reply of assistance.

Customer: replied 1 year ago.
Thank you.
For clarification then:
Firstly: With each sibling having received £100k each as a PET they will only have to pay IHT if the estate cannot afford to pay it.
Secondly: is the exposure 726-650 = 76k and not 126k?


The exposure is 726K - 650K = 76K, so 30.4K tax due, sorry for the error! What could I be thinking of, 600K indeed?

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Customer: replied 1 year ago.
Last clarification;
Am I correct therefore that your answer advises the small gifts and monthly gifts from income , that I have quoted, do not count towards the 325k which is quoted on the Gov website set out below. I conclude this as your initial answer only shows PETs as potentially being liable for IHT if estate cannot afford.Thanks
3. Gifts
There’s usually no Inheritance Tax to pay on small gifts you make out of your normal income, such as Christmas or birthday presents. These are known as ‘exempted gifts’.There’s also no Inheritance Tax to pay on gifts between spouses or civil partners. You can give them as much as you like during your lifetime, as long as they live in the UK permanently.Other gifts count towards the value of your estate.People you give gifts to will be charged Inheritance Tax if you give away more than £325,000 in the 7 years before your death.

Your interpretation is largely correct.

Inter spousal gifts are outside the scope of UK taxation.

Beneficiaries of gifts are only liable for IHT if the estate cannot meet the tax due on assets over the tax free limit which can be as high as 650K as it is in this case.

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