IHT400 Notes : Guide to completing your Inheritance Tax account

Value of gifts
Who pays the
Inheritance Tax on
a gift?
IHT400 Notes
Guide to completing your Inheritance Tax account
It is important that you let us know the value of any gifts made by the
deceased in case the value needs to be deducted from the nil rate band, so
we can work out how much tax is payable.
Include full details of all gifts that are not wholly covered by Spouse or
Civil Partner Exemption, Small Gifts Exemption or Annual Exemption.
Full details of these exemptions can be found on page 72 of this guide.
If the total value of the gifts is below the Inheritance Tax nil rate band,
the gifts use up the nil rate band first. The tax payable on the estate
takes into account the gifts, but the recipients do not have to pay any of
the tax themselves. The tax will be paid by the personal representatives.
Example
A makes a gift of £100,000 on 3 May 2005 and dies on 18 July 2006.
A's estate on death is £300,000.
Inheritance Tax is calculated:
IHT nil rate band on 18 July 2006 £285,000
Less gift £100,000
Nil rate band available £185,000
A's estate on death £300,000
Less available nil rate band £185,000
Chargeable
Tax on estate at 40% = £115,000 x 40%
£115,000
Tax due = £46,000
If the gifts total more than the nil rate band for Inheritance Tax, then
the tax is due on the gifts themselves and is payable by the recipients
of the gifts.
Example
B makes a gift of £300,000 on 10 May 2005 and dies on 27 August 2006.
B's estate on death is £500,000. Inheritance Tax due on the gift is calculated:
Gift £300,000
Less IHT nil rate band on 27 August 2006 £285,000
Chargeable
Tax on gift at 40% = £15,000 x 40%
£15,000
Tax due = £6,000
The Inheritance Tax on the estate, payable by the personal representatives,
is £500,000 x 40% = £200,000.
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