IHT Gift Allowances

[Jason123456]

For a number of years my wife and I have regularly used our £3k Annual IHT gift allowance to to invest for our 5 grandchildren ,...ie £6k equally divided each tax year,sometimes on different months of the tax year.
This tax year 2019/2020 I only am considering,in addition to the above allowance that I also give a further £3k gift amongst the grandchildren to come from my income.
In this situation can I now consider that the previous annual gift £3k can be perceived as coming from income rather than capital,being on a regular basis,and that i could continue to make gifts(£6K = £3k+£3k) on this basis in future years.
If I am able to do this,it would obviously mean my earlier annual capital gifts(£3k) would each translate into ‘zero’ for those years.

Is the following acceptable

This year A(me) = £1.8k to a,£1.8k to b,£1.8k to c,£0.3k to d and £0.3k to e..........total £6k
B(my wife) = £1.5k to d, and £1.5k to e.........total £3k

and same in future years

Previous years A and B distribute £3k each among a,b,c,d and e.,as gifts from capital,but in my case in view of above to be now considered as gifts from income.

[AGoodman]

Yes, it could be provided you do have that excess income after your expenditure has been deducted.

Bear in mind that gifts over and above exemptions are only at risk of IHT if you die within 7 years - and if you die with it, it is definitely at risk of IHT.

To that extent, it is rarely beneficial/necessary to restrict your gifts to £3k p.a. if you have other funds you would like to give away.

[Jason123456]

Thank you,


If previous years gifts were made at the second year of the two,whereby a gift of £6k was made,can this be regarded as two separate consecutive years of £3k ea. when considering treating them as gifts from income,to obtain the principle of regular annual payments?

[Uther]

Gifts out of Income exemption can only be claimed from HMRC after death.
This requires detailed record keeping of income and expenditure for up to seven years.

Have a look at IHT403 sheet 8
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/750238/IHT403_10_18.pdf

For a fuller explanation of all the requirements read this overview.
https://www.womblebonddickinsonwealth.com/sites/default/files/resource-files/Inheritance%20Tax%20-%20The%20Normal%20Expenditure%20out%20of%20income%20Exemption.pdf

If, after reading the above, you want to give away an additional amount to your grandchildren then cash may be a consideration.

[Jason123456]

If, after reading the above, you want to give away an additional amount to your grandchildren then cash may be a consideration.

Presumably you mean as a PET.

[state.revenue.contributor]

Gifts out of Income exemption can only be claimed from HMRC after death.

Just to clarify for other people reading this, the above is not quite right. If the exemption is claimed on an immediately chargeable lifetime transfer of a gift into trust, the taxpayer must submit the claim during his/her lifetime. HMRC will then decide on the claim there and then. I appreciate, however, that this may not be relevant here.