Inheritance Tax (IHT) Yearly Exemptions
Posted by siteadmin on Tuesday 22nd of March 2016.
The extended nil rate band freeze (ref 2016 Budget) makes the yearly IHT exemptions all the more important:
The £3,000 annual exemption. Any unused part of this exemption can be carried forward one tax year, but it must then be used after the £3,000 exemption for that year. So, for example, if you made a gift of £1,000 covered by the annual exemption in 2015/16, you can make gifts totalling £5,000 covered by the annual exemption in 2016/17 by 5 April 2017.
- The £250 small gifts exemption. You can make as many outright gifts of up to £250 per individual per tax year as you wish free of IHT, provided that the recipient does not also receive any part of your £3,000 annual exemption.
- The normal expenditure exemption. Any gift that you make is exempt from IHT if:
- it forms part of your normal expenditure; and
- taking one year with another it is made out of income; and
- it leaves you with sufficient income to maintain your usual standard of living.
Year End Planning: If you are making an annual exemption gift by way of a cheque, remember that legally the gift is only made once the cheque is cleared. Tuesday April 5 is the final banking day of 2016/17, so a cheque given the previous weekend (2/3 April) will probably not clear in time.
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