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Where Taxpayers and Advisers Meet

Profit on cash gifts and IHT

crumms
Posts:8
Joined:Sun Nov 01, 2020 2:57 pm
Profit on cash gifts and IHT

Postby crumms » Wed Oct 27, 2021 12:57 pm

Hello there,

With apologies if this has already been answered.

If i was in a lucky enough position to have parents who had an estate valued in the region of £2m and they liquidated some of their assets and gave me a large lump sum of cash (say in the region of £600k), my parents other assets would total in the region of £1.4m. I also understand that, as long as they were to survive 7 years, that 600k would fall out of their estate for IHT calculations.
Now let's say on the day i received the cash gift, i took it and invested it all by purchasing shares of some stock. Let's then say my parents then both passed away 2 years after the gift. Now the original sum was £600k but the value of the stock had (rather incredibly) gone up by, let's say, 50% meaning that the total amount in my share dealing account would then be £900k. Would any IHT liability rest on the original gift or would it include any profit gained on it in the meantime? Would i be allowed to liquidate the shares and use any profit to pay for IHT? Obviously CGT would be liable on any profit on sale of the shares but i'm specifically asking here about the IHT factors.

I hope that all makes sense. For a less 'sexy' example i could have just said i put the lump sum into a bank account paying 1% interest per year and still been in a similar situation wrt profit earned on lump sum gifts and IHT!

Thanks for any help anyone can give.

iwmtaxadvisor
Posts:45
Joined:Wed Sep 09, 2020 5:12 pm
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Re: Profit on cash gifts and IHT

Postby iwmtaxadvisor » Wed Oct 27, 2021 1:07 pm

>Would any IHT liability rest on the original gift or would it include any profit gained on it in the meantime?
Just the original gift
> Would i be allowed to liquidate the shares and use any profit to pay for IHT?
Sure. See the 'Sally' example https://www.gov.uk/inheritance-tax/gifts
Robert Warren
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crumms
Posts:8
Joined:Sun Nov 01, 2020 2:57 pm

Re: Profit on cash gifts and IHT

Postby crumms » Wed Oct 27, 2021 2:47 pm

Thank you!

Samson22
Posts:58
Joined:Mon Aug 17, 2020 10:54 am

Re: Profit on cash gifts and IHT

Postby Samson22 » Wed Oct 27, 2021 3:02 pm

I would venture further. On the amounts above 325k each or 650k for both parents the amount of Inheritance tax would reduce 20% per year after 3 years till 7 years when it would be not counter for Inheritance tax purposes. Ie after 3 years it would go down to 32 24 16 8. But I repeat only amounts above that. So I guess arguably may make gift it from one person if it was to be over that amount.


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