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She may gift up to £3,000 in any tax year and there will be no Inheritance Tax (IHT) consequences. She may also gift an additional £3,000 in the first year (if no gift was made in the previous year).
If gifts exceed this amount, they are treated as Potentially Exempt Transfers (PETs) for IHT purposes. This means that there is no lifetime charge but, in the event that you mother dies within 7 years of making the gift, some or all of it will be included in her estate when computing its value for IHT. The proportion of the gift 'added back' to the estate depends on whole years of survivorship and are as follows:
Less than 3 years - 100%
3 - 4 years - 80%
4 - 5 years - 60%
5 - 6 years - 40%
6 - 7 years - 20%
Over 7 years - 0%
Your mother's estate will, of course, have a nil rate band (presently £255,000) so if the value of estate on death is less than this no IHT will arise.
If you require any further assistance please do not hesitate to contact us, and we will be happy to act on your behalf.
Nigel Lord
Lord Associates
Taxation & Business Consultants
Caxton House
Old Station Road
Loughton
Essex, IG10 4PE
020 8418 9101 & 07769 931852
mail@lordassociates.co.uk