Potentially exempt

AlaaAlaa Posts: 30Registered
Hi , are marriage , small gifts potentially exempt ?

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  • CornishPixieCornishPixie Posts: 107Registered, MAAT, AATQB, AAT Licensed Accountant
    Have a look at lifetime exemptions!
  • AlaaAlaa Posts: 30Registered
    What are the potentially exempt examples ? You mean the lifetime exemptions could be potentially exempt ? Could you please clarify because I am confused
  • Welshie999Welshie999 Posts: 8Registered
    Hi Alaa,

    The small gifts and marriage allowances are Exempt Transfers (ETs). Going above these limits may create a Potentially Exempt Transfer (PET) as follows:


    For the marriage allowance Cornish Pixie has laid out the limits (above). So, for example, Granny gives granddaughter a £5,000 gift on her wedding day. £2.5k of this is exempt and £2.5k potentially exempt. The "potentially" bit refers to the 7 year rule, so if Granny sadly passes away within 7 years of the wedding then the £2.5k outside the allowance may be taken into account for IHT purposes. This will all depend on Granny's other transfers in and around this time, of course.
    Have a look at this article that deals with such a question: https://www.ft.com/content/08c452ce-a6e5-11e8-926a-7342fe5e173f

    The situation as I understand it is different for the small gifts allowance. This is £250 per recipient, per tax year. So a gift of up to £250 to someone will be an ET, but if the gift was £260 then the WHOLE thing becomes a PET for IHT purposes, not just the £10 above the limit.

    Hope this helps.

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