According to HM Revenue and Customs (HMRC), fewer than half of people who make gifts are aware of inheritance tax (IHT) rules and exemptions.
The Chancellor agrees. Last year Philip Hammond started a review into IHT rules as he believed them to be particularly complex and the stats back that assumption up.
After surveying 2,900 people, HMRC found that one in eight had given a gift within the past two years, with 13 per cent having given a single gift of £1,000 or more, or multiple gifts of at least £250 totalling £3,000 or more.
What are IHT rules?
As this article suggests, the full rules are complex but some headlines are:
- IHT is paid at 40 per cent on a deceased person’s estate above the threshold of £325,000 however, there are a few exemptions
- Gifts valued at less than £250 individually, and totalling less than £3,000 per year, are exempt from IHT
- Where the estate is left to a spouse or civil partner there is no tax to pay and when a home is passed to children or grandchildren the £325,000 threshold rises to £475,000
- Unused reliefs can also be added to partners, for a total exemption of £950,000
- IHT becomes payable when gifts are made within seven years of an individual’s death, as they will then be added to the total value of the estate and if the total value exceeds the threshold then these gifts are taxed.
Families paid a record £5.4bn in tax revenue in the 2018-19 financial year, with the average inheritance tax (IHT) bill reaching almost £200,000, according to data published on May 15.
NFU Mutual’s analysis of HMRC’s tax receipts found that 5,000 individuals paid IHT last year while they were still alive as a result of gifts to certain types of trust that can trigger a bill.
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