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Where Taxpayers and Advisers Meet

IHT and form IHT205

Posts: 62
Joined: Wed Oct 11, 2017 1:53 pm

IHT and form IHT205

Postby Jason123456 » Wed Jan 15, 2020 5:55 pm

If today I make a gift to my grandchildren of £20k,having already made use of IHT gift allowances and I died within a year, I am trying to establish if IHT would be due on this amount by virtue of the 7year rule and it being a PET.

I intend for my wife to automatically or via my Will to inherit my estate.
If my estate is made up of investments of £300k and my share of house of £200k(T-in-C), ie total £500k, and this goes to my wife, where does the NRB enter the IHT calculations?

Am I correct in thinking that there would be no IHT to pay on this first death,and that the £20k gift would be deducted from my transferred NRB to my wife, this transfer would now be £305k,and therefore a total NRB on second death of £325k+£305k.
And finally if above applies i presume it would be form IHT205(2011) that would need to be completed by the Executors following my death,and having looked at this form,£20k would be the ‘Net qualifying value for excepted estates’...Box K on the form.(assuming rest of form has been completed correctly wrt debts,etc.)

Posts: 1043
Joined: Fri May 16, 2014 3:47 pm

Re: IHT and form IHT205

Postby AGoodman » Fri Jan 17, 2020 4:10 pm

The first £325k of non-exempt gifts made in the last seven years of your life are in the nil rate band so taxed at...nil.

Failed PETs will however reduce the nil rate band available to set against the remainder of your estate or transfer to your spouse.

If you leave your estate to your wife, the nil rate band isn't needed except to set against the gifts - the rest of your estate is exempt. No IHT.

Your wife would then have her own nil rate band, a transferrable nil rate band (reduced proportionately for any failed PETs you made), the RNRB and transferrable RNRB, a possible max of £1m if you have children and leave a property or sale proceeds to them.

The transferred NRB would be £305k but only if the nil rate band has stayed the same at £325k when your wife died. It is applied proportionately if the NRB has increased in the meantime.

Posts: 62
Joined: Wed Oct 11, 2017 1:53 pm

Re: IHT and form IHT205

Postby Jason123456 » Fri Jan 17, 2020 5:14 pm

Thank you,.....I believe that confirms my thinking!......most appreciated.

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