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Give and take

Regular giving is an effective weapon in the armoury of inheritance tax planning strategies

19 December 2011

For many, inheritance tax (IHT) planning involves using the annual exemption of £3,000 per annum and making gifts with the hope that they will meet the required seven-year period for exemption to apply.

However, such planning is typically periodic and can be ineffective. It also does not address the problem of the estate increasing in value between gifts. This can be unavoidable, if only because of appreciation in house values; but for those with incomes in excess of their day-to-day needs, help is afforded by section 21 of IHTA 1984 ‘Normal expenditure out of income’.

Welcome relief

The key benefits of this relief are that gifts are immediately exempt and there is no prescribed limit, so long as the conditions are met. The conditions are that: a) the gift must be made as part of normal expenditure; b) the gift must be made out of income, taken year ...

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