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Where Taxpayers and Advisers Meet

Are Regular Payments excluded from IHT?

Vonsworld77
Posts:3
Joined:Sat Jun 05, 2021 1:45 pm
Are Regular Payments excluded from IHT?

Postby Vonsworld77 » Sat Jun 05, 2021 2:00 pm

Hi

Please could someone advise me on the following.

My father has been paying me £200/month for several years. This is a regular payment from his income to help with my living expenses. I am his regular carer and as such am unable to work full time, so he has been helping me out.

Once a year he also gives me a lump sum of £5000-£10000 which is clearly a gift and needs to be included in the IHT calculation.

However does the regular payment need to be included too?

The regular payment is less than £3000/year and the IHT information say that this is excluded, since it's a regular payment from normal income towards my living expenses, but does this change because be also gives me the lump sum?

Thanks

John

Lambs
Posts:1558
Joined:Wed Aug 06, 2008 3:15 pm

Re: Are Regular Payments excluded from IHT?

Postby Lambs » Sun Jun 06, 2021 7:07 am

V,

The regular payment will not "affect" the larger one-off amount. See IHT Manual at (and around)

https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm14242

Regards,

Lambs

Vonsworld77
Posts:3
Joined:Sat Jun 05, 2021 1:45 pm

Re: Are Regular Payments excluded from IHT?

Postby Vonsworld77 » Sun Jun 06, 2021 10:51 am

Hi Lambs,

Thank you for the reply which is very helpful.

I have read the IHT manual and it appears the regular payments will be exempt.

Just to clarify, having exempted the regular monthly payments, can I still subtract the full £3000/year allowance from the other one-off gifts?

Regards

John

Lambs
Posts:1558
Joined:Wed Aug 06, 2008 3:15 pm

Re: Are Regular Payments excluded from IHT?

Postby Lambs » Sun Jun 06, 2021 11:44 am

V,

I fear I have misread your original post. You say "once a year" he gives you a lump sum of £5k+. When I first read this, I thought it was a "one-off" payment but it seems regular, albeit only annual. Is this reducing his capital wealth, or is he paying this out of his spare annual income?

If it is NOT reducing his capital wealth, and this is effectively coming out of spare income for the year after the other smaller gifts, then it MAY STILL be a gift out of income and exempt. Just because it's only once a year does not mean it isn't "regular", like the other smaller/more frequent gifts.

If it IS reducing his capital wealth every year, then it will be a Potentially Exempt Transfer or PET, and will be presumed exempt unless he DOES NOT survive the gift by 7 years. It will then be chargeable, but you will be able to utilise the £3,000 annual allowance.

I hope this is clearer.

With regards,

Lambs

Vonsworld77
Posts:3
Joined:Sat Jun 05, 2021 1:45 pm

Re: Are Regular Payments excluded from IHT?

Postby Vonsworld77 » Sun Jun 06, 2021 12:11 pm

Hi

Thanks for clarifying.

Hopefully we should not have to pay IHT even if the annual £5k+ amounts are included in the IHT calculation.

I was more concerned that the regular monthly payments should be excluded and that appears to be the case.

I have found the IHT Notes a bit confusing. It says that if regular payments are less that £3000/year (which they are) you don't need to include them on the IHT205 form.

So does that mean you put just the one off larger amounts on the form, less the £3000/year allowance?

The monthly gifts plus birthday and xmas presents are all out of his regular income and do not effect his capital.

Regards

John

Lambs
Posts:1558
Joined:Wed Aug 06, 2008 3:15 pm

Re: Are Regular Payments excluded from IHT?

Postby Lambs » Sun Jun 06, 2021 3:40 pm

V,

I am not sure why you want advice on an IHT205 while it appears that the relevant individual is still alive. But you would need to fill in Box 9 of the IHT205 when dealing with the Estate, if total gifts exceed £3,000pa anyway. My understanding of the exemption for annual gifts is that this is ALONGSIDE / AS WELL AS the gifts out of income exemption. It would be easy to infer differently from the notes supporting the IHT205. But that is because the IHT205 serves the purpose of determining whether or not you are allowed NOT to complete / return the "full" IHT400, and I think that is why it is asking for the extra information. To put it another way, the IHT205 is not "the IHT calculation"; the IHT205 is there so you can AVOID doing "the IHT calculation".

With regards,

Lambs


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