Gift Rule £3000

[Stuartyboy]

Hi,
Can someone clarify for me the amount of money that can be gifted from my 80 yr old mother in law. She has sold her house and wants to gift her 3 daughters £3000 each and similar to her 4 grand children.. Is the gift amount £3k total allowed or £3k to each individual?

[bd6759]

There is no restriction on gifts. She can gift as much as likes.

The £3k limit is the amount that a person can gift that will be disregarded should that person die within 7 years. It does add to the liability, it just doesn't immediately reduce it.

[bd6759]

There is no restriction on gifts. She can gift as much as likes.

The £3k limit is the amount that a person can gift that will be disregarded should that person die within 7 years. It does add to the liability, it just doesn't immediately reduce it.

It does NOT add to the liability ...

[Stuartyboy]

Hi,
Thanks for your posts, much appreciated..
Just to add a point.. What if the elderly lady had to go into a care home. The care home would need most of her funds for her care. Therefor, if she gifted her money away and then went into a home and at some point ran out of funds.... the local authority may seek to recover this 'gifted money'?

[LozaACCS]

It is 3K in total, not per individual, other exemptions available are
1 Small gifts up to £250 per individual per year (S20 IHTA 1984), if the gift exceeds £250 you lose all of the exemption for that individual.
2 Marriage Exemption, £5,000 for a child, £2,500 for a grandchild, (S22 IHTA 1984).

Direct gifts will almost certainly be treated as a deprivation of capital and challenged by the LA.
A gift into a discretionary trust might work, however it can still be challenged and in the scenario you describe I think it probably would.

If your mother made regular gifts for a specified purpose, say 10K per year, they would not be exempt for IHT (except for the 3K at S19), however it might be more difficult for the LA to establish that this was a deliberate deprivation of capital.

[Grandma Uk]

In the Family Finances section of the i newspaper this week it states " In the UK, grandparents can give away £3000 to each family member every year free from inheritance tax" Now I'm really confused. If I have eight family members does this mean I can give away £24000 without worrying about inheritance tax?

[maths]

No.

For IHT purposes some lifetime gifts may be exempt.

The £3,000 is an annual exemption. It simply falls outside any charge to IHT. It is an aggregate annual figure. Thus, in any tax year X could for example give £3,000 to A; or £1,500 to B and £1,500 to C. But not £3,000 to each person.

If X gave A say £5,000 then £3,000 would be exempt but the balancing £2,000 would be subject to IHT if X died within 7 years of making the gift.

Unused parts of the £3,000 can be carried forward but only for one year.

There is also the nil rate band, worth £325,000.

Thus, if X had never made any lifetime gifts X could, for example, gift £3,000 to A; £5,000 to B; £50,000 to C in a tax year a total of £58,000. Let's assume X dies a couple of weeks later.
As X died within 7 years of making each gift all gifts are now chargeable to IHT. However, the first £3,000 of gifts is exempt leaving £55,000 subject to IHT. But X has a nil rate band of £325,000 ie up to the next £325,000 after the £3,000 has been deducted is subject to IHT but at 0% (ie n il). So £55,000 is subject to IHJT at 0% ie nil.

[AGoodman]

" In the UK, grandparents can give away £3000 to each family member every year free from inheritance tax"

As maths said, this is just wrong.