Inheritance tax, gifts and reducing liability

[left-long-ago]

Relative's estate is worth just under 2 million. Their children live abroad. For cash gifts, is tax levied on the individual in the UK giving or is it up to the children to declare it where they live?

Any other ways to reduce exposure to the taxman more than welcome

 

[David Griffiths]

There is no immediate tax on gifts in the UK, but they continue to be counted as part of the donor's estate for seven years. Inheritance tax is levied on the estate, not the recipient of the gift.

People receiving gifts in the UK do not pay tax. In some other countries they do pay tax.

Reduce exposure to tax man? Easy. Give it all to charity. Nobody can give any meaningful advice without knowing a lot more, and it's not the kind of thing that you should trust forum advice on anyway.

 

[left-long-ago]

I thought there was a limit to what one can give away per year as gifts without being taxed

to quote HMRC's website

Top
Annual exemption

You can give away gifts worth up to £3,000 in total in each tax year and these gifts will be exempt from Inheritance Tax when you die. You can carry forward any unused part of the £3,000 exemption to the following year, but if you don't use it in that year, the carried-over exemption expires.
In addition to the annual exemption there are other exemptions for certain types of gifts. These are explained below.

 

[cheaper accountant]

David was referring to Potentially Exempt Transfers (PETs) and such transfers can exceed £3,000. Read more on PET's here.

The seven year rule doesn't apply to gifts made up to £3,000 each year which the annual allowance you mention.

 

[Yorkshire&Online]

I agree with david 100%. There are a number of ways of mitigating IHT with careful planning and with an estate worth just under £2 million, surely some professional advice has got to be worth it to minimise the inevitable.

You will probably get a free consultation anyway to start with.

Some basic info here for IHT on my website if it helps anyone though:

http://www.brown-royd.co.uk/resources-tax/inheritance-tax-and-gifts

 

[cheaper accountant]

We do not work in the inheritance tax field, but I completely agree that it is essential to seek expert advice in relation to this and to plan this in detail. With careful and detailed planning you can significantly reduce your exposure to inheritance tax.

 

[Homshaw]

There is a greater book at Tax Cafe which explains the issues but on such a large amount I would follow it up with professional advice. IHT is an area you can save a lot of money with proper planning

 

[Tom McClelland]

I thought there was a limit to what one can give away per year as gifts without being taxed

to quote HMRC's website

Top
Annual exemption

You can give away gifts worth up to £3,000 in total in each tax year and these gifts will be exempt from Inheritance Tax when you die. You can carry forward any unused part of the £3,000 exemption to the following year, but if you don't use it in that year, the carried-over exemption expires.
In addition to the annual exemption there are other exemptions for certain types of gifts. These are explained below.

£3000 is the limit that doesn't attract tax even if the donor dies within 7 years. If the donor lives for 7 years then a gift entirely escapes UK tax, regardless of its size.

I agree with others here. For an estate of that size seek a professional who specialises in such matters.