IHT400 Notes : Guide to completing your Inheritance Tax account

72
IHT400 Notes
Exemptions that only
apply to lifetime gifts
Exemptions that apply
to lifetime gifts and
transfers on death
A Website:www.hmrc.gov.uk/
inheritancetax
Helpline: 0845 30 20 900
Guide to completing your Inheritance Tax account
Exemptions and reliefs —
this section gives more detailed
information about exemptions
and reliefs
Small gifts up to £250 in any tax year to any one person. Such small gifts
can be given to any number of different people.
Annual exemption of £3,000 in any one tax year. You can carry forward all
or part of the £3,000 exemption that has not been used to the next
tax year but no further.
Lifetime gifts that represent normal expenditure out of the transferor’s
income. These are exempt provided that the transferor’s established
standard of living is not reduced by the gifts, that the gifts came out of
income and not capital and there is an established pattern of giving.
These gifts can include:
• monthly or regular payments to someone, including gifts for Christmas
or other festivals, birthdays or other anniversaries
• regular premiums on a life assurance policy.
Fill in pages 2 and 6 of Schedule IHT403 Gifts and other transfers of value
if you want to deduct this exemption.
Gifts in consideration of marriage or civil partnership up to the
following amounts:
• £5,000 if the gift is made by a parent or step-parent of either party to
the marriage or civil partnership
• £2,500 if the gift is made by a grandparent of one of the parties
• £1,000 in any other case.
Spouse and Civil Partner Exemption
All transfers between legally married spouses and legally registered
civil partners are exempt with one exception. If the person making the
transfer is domiciled in the UK and the recipient is not, the Spouse or
Civil Partner Exemption is limited to £55,000.
There is a special rule if the deceased benefited from a trust set up
by the Will or intestacy of a spouse or former spouse who died before
13 November 1974. The value of the trust is not taken into account if:
• Estate Duty was paid or treated as paid on the earlier death on the
assets in the trust, and
• the deceased was not able to dispose of the assets.
If the deceased was given the power to say how the assets should be dealt
with during their lifetime or on their death, the exemption would not
apply. If you are deducting this exemption from the assets in a trust, any
apportioned income due in box 75 of form IHT400 is also exempt. But the
exemption does not apply to accrued income that had not been paid to the
deceased and included in box 75.