Inheritance Tax (IHT)

IHT is payable when you die or if you make taxable gifts during your lifetime. On death, if a person’s estate (that is, the value of his assets less his liabilities) exceeds £312,000 IHT is payable on any excess.

There are various exemptions, the principal ones being:

• Small gifts of up to £250 can be made each year;
• Annual gifts not exceeding £3,000 can be made each year (and the exempt amount can be carried forward one year if you don’t make any in a particular year);
• Normal gifts out of income;
• Gifts in consideration of marriage.

In addition to this, you can give away during lifetime any amount as a Potentially Exempt Transfer (PET) and, provided you survive the gift by seven years, that PET is no longer taxable. If you do die within seven years any PETs you have made are added back into your estate and tax may become payable on them.

Gifts between husband and wife are normally exempt from IHT altogether but this does not apply if one party to the marriage is not domiciled in the UK.

Careful planning can help to avoid IHT but this should be undertaken as early as possible. We can advise on this.