Trusts and Inheritance Tax

Exempt transfers for IHT

Produced by Tolley
  • 21 Dec 2021 16:32

The following Trusts and Inheritance Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Exempt transfers for IHT
  • Exempt transfers ― summary
  • Total exemption
  • Partial exemption
  • Mature PETs
  • Transfers between spouses or civil partners (the spouse exemption)
  • Annual exemption
  • Annual exemption and PETs
  • Small gifts
  • Normal expenditure out of income
  • More...

Exempt transfers for IHT

This note will explain when transfers are exempt. However, it should be noted that some exemptions do not apply in relation to the estate charge on death.

Exempt transfers ― summary

Total exemption

A transfer is exempt from IHT where it is:

A potentially exempt transfer (PET) which is made seven years or more before deathIHTA 1984, s 3A(4)
To a spouse or civil partner who is domiciled in the UKIHTA 1984, s 18
Classified as a small giftIHTA 1984, s 20
Classified as normal expenditure out of incomeIHTA 1984, s 21
A gift to a charity or registered clubIHTA 1984, s 23
A gift to a political partyIHTA 1984, s 24
A gift to a housing associationIHTA 1984, s 24A
A gift for national purposesIHTA 1984, s 25
A gift to a maintenance fund for a historic buildingIHTA 1984, s 27
A gift to an employee trustIHTA 1984, s 28

Partial exemption

The above transfers are totally exempt from IHT. The following are exempt up to a specified amount:

A transfer to a spouse or civil partner who is not domiciled in the UKIHTA 1984, s 18
A transfer that benefits from the annual exemptionIHTA 1984, s 19
A gift in consideration of marriage or civil partnershipIHTA 1984, s 22

Mature PETs

Where a lifetime transfer is treated as potentially exempt at the time it is made, because it is a PET, that transfer becomes fully exempt if the donor survives for seven years or more after making it.

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