Mark McLaughlin outlines an inheritance tax exemption for gifts, which might be particularly attractive to individuals wishing to make gifts without waiting for the normal seven-year period before gifts become exempt.
When it comes to tax reliefs and exemptions, one of the most generous is the inheritance tax (IHT) exemption for ‘normal expenditure out of income’. This is because the exemption is only limited broadly by an individual’s personal circumstances and the amount of surplus income available to give away.
Satisfying the conditions
The IHT exemption is for ‘normal expenditure out of income’ (IHTA 1984, s 21). An individual can benefit from the exemption to the extent that certain conditions are satisfied. These are broadly:
• the gift was part of the normal expenditure of the person making it;
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