The following Trusts and Inheritance Tax guidance note Produced by Tolley in association with Emma Haley at Boodle Hatfield LLP provides comprehensive and up to date tax information covering:
A valuable exemption from inheritance tax (IHT) applies to gifts out of surplus income. This exemption applies only to lifetime gifts and is therefore a key part of lifetime planning. The exemption applies to both outright gifts and gifts into trust.
Gifts which meet the qualifying conditions (see below) are immediately exempt from IHT so it is not necessary to survive seven years to obtain the exemption. Exempt gifts are not aggregated with later gifts and do not eat into the IHT nil rate band. Clients should make use of basic exemptions such as this before embarking on more complex lifetime planning.
There is no set limit on the amount that can be given away, provided the gift does not exceed the donor’s surplus income.
The qualifying conditions in order for this exemption to apply are as follows.
Gifts made from capital will not be covered by the exemption and it will ultimately be necessary to demonstrate that the gifts were made from net (post-tax) income (see ‘Claiming the exemption’ below).
Income normally takes the form of cash and so cash gifts are the most obvious format for this exemption.
However, HMRC accepts that a gift of other assets can qualify, provided the item in question was purchased specifically from surplus income with the intention of making the gift.
HMRC considers income to be current income, which is generally taken to mean income from a particular tax year, although some carrying over of income from year to year is permitted.
However, the exemption will not apply to gifts mad
**Free trials are only available to individuals based in the UK. We may terminate this trial at any time or decide not to give a trial, for any reason.
Access this article and thousands of others like it free for 7 days with a trial of TolleyGuidance.
Read full article
Already a subscriber? Login
The married couple’s allowance (MCA) is only available if one of the two spouses or civil partners was born before 6 April 1935. This means that one member of the couple must be at least 87 years old on 5 April 2022 to qualify for an allowance in the 2021/22 tax year.There is a distinction in the
Universal credit is a non-taxable benefit that is administered by the Department of Work and Pensions (DWP) and is available throughout the UK. It is available to individuals on low incomes whether they are in work, unemployed or self-employed. It is designed as a replacement for several ‘legacy
IntroductionA pension scheme that is not a registered scheme is known as an EFRBS. Since April 6 2006, the distinction between what were approved and unapproved pension schemes has been replaced with a distinction between registered and unregistered schemes.The position as it applies with effect
This guidance note provides an overview of the basic principles of inheritance tax, when it is charged and how it is calculated. It contains links and references to other parts of the module where more details can be found.Transfers of valueInheritance tax is based on the concept of a transfer of