We All Need a Gifting Diary for Inheritance Tax Planning
Published / Last Updated on 19/08/2022
This is the third and final video this week on a closer look at life insurance in trust to cover inheritance tax liabilities on death and the need to be careful about what type of trust you use and also how it is paid for: IHT & Life Ins
- Normal income where your standard of living is not reduced
- Normal income where your standard of living is reduced
- Non-Standard ‘income’ such as insurance investment bond and discounted gift trust ‘income’
We also looked at the difference between types of gifts and how long you need to live: 7 and 14 Yr IHT Rule
- Potentially Exempt Transfer (PET) gifts where inheritance tax may be exempt if you survive for 7 years.
- Chargeable Lifetime Transfer (CLT) gifts inheritance tax may be payable immediately.
- When the 7-year PET rule fails, you may need to go back up to 14 years of gifting to check previous gifts as to whether it creates an additional tax liability or not if there were chargeable lifetime transfers.
Given that you now know you need to keep gifts for up to 14 years, you really need to keep a Gifting Diary.
Gifting Diary:
As record of dates, amounts, who, exemptions used etc. This will help the executors and trustees of you will when you die or it may help you if you make too many chargeable lifetime transfer gifts in a rolling 7 year period.
|
Tax year of gift |
Date of gift |
Description |
Value of transfer |
Exemption used |
Net PET |
Net CLT |
|
2008/09 |
06/04/2008 |
Cash gift to daughter and son |
£6,000 |
£6,000* |
||
|
2008/09 |
01/10/2008 |
Gift to Discretionary Trust |
£225,000 |
£0 |
£225,000 |
|
|
2009/10 |
06/04/2009 |
Cash gift to son |
£3,000 |
£3,000** |
||
|
2010/11 |
06/04/2010 |
Cash gift to daughter |
£3,000 |
£3,000** |
||
|
2011/12 |
06/04/2011 |
Cash gift to son |
£3,000 |
£3,000** |
||
|
2012/13 |
06/04/2012 |
Cash gift to daughter |
£3,000 |
£3,000** |
||
|
2013/14 |
06/04/2013 |
Cash gift to son |
£3,000 |
£3,000** |
||
|
2014/15 |
06/04/2014 |
Cash gift to daughter |
£3,000 |
£3,000** |
||
|
2015/16 |
01/09/2015 |
Cash gift to daughter and son |
£300,000 |
£3,000** |
£297,000 |
|
|
2016/17 |
No Gifts |
No Gifts |
£0 |
£0 |
||
|
2017/18 |
06/04/2017 |
Cash gift to daughter and son |
£6,000 |
£6,000* |
||
|
2018/19 |
No Gifts |
No Gifts |
£0 |
£0 |
||
|
2019/20 |
No Gifts |
No Gifts |
£0 |
£0 |
||
|
2020/21 |
06/04/2020 |
Cash gift to daughter and son |
£6,000 |
£6,000*** |
||
|
2021/22 |
06/04/2021 |
Cash gift to son |
£3,000 |
£3,000** |
||
|
2022/23 |
06/04/2022 |
Cash gift to daughter |
£3,000 |
£3,000** |
* = Unused annual gifting allowance from previous year so can carry forward 1 year to gift £6,000 (£3,000 last year + £3,000 this year).
** = Unused annual gifting allowance £3,000.
*** = Unused gift from previous 2 years BUT can only carry forward 1 year so gift £6,000 (£3,000 last year's + £3,000 this year's allowance) and NOT the last 2 years unused gifting allowance.
Having a Gifting Diary just like this and keeping it with your Will or other important documents can only help both you, your financial adviser and your executors/trustees keep track of gifts, amounts, exemptions used and whether they are potentially exempt transfers or chargeable lifetime transfers to help plan for inheritance tax and use best strategies to mitigate inheritance tax.
