gifts - Stish

Although gifts (or "potentially exempt transfers") made in the 7 years before a person dies can be subject to inheritance tax, a number are exempt from tax.
A list of exempt gifts can be found in a leaflet available from the Inland Revenue. Examples of these gifts include:
- wedding gifts valued at up to:
- maintenance payments to ex-partners and children.
- other gifts of up to £3,000 made during the tax year. (If this is not used up in 1 year, the amount can be carried forward to the next. After 3 years, the tax payable on the gifts starts reducing until it reaches nil at year 7.
- Small gifts of up to £250 can made to any number of people in any single year (this is known as "taper relief").
- Gifts to:
  - UK charities
  - museums
  - universities
All gifts made by the deceased within 7 years before the death are included in the estate for tax purposes. (Please note that the criteria for exemption is subject to change.)
If the death is within 3 years, the recipient must pay 40% tax on anything over the threshold. Thereafter a sliding scale is applied resulting in a reduction of 1/5th of the tax payable if the gift was made between 3 and 4 years before death, another 1/5th between 4 and 5 years and so on until the 7th year when the gift becomes totally exempt.
Although there is no inheritance tax paid on a gift made 7 years before the death of the donor, chargeable transfers can incur tax.
If a person gives away his/her home to children or relatives, this will not automatically exempt payment of inheritance tax. If the donor intends to keep living in it, he/she will need to prove that they are paying the new landlord the correct market rent. The landlord could also face a capital gains tax bill when the property is sold and the inheritance tax sum owned if the donor dies within 7 years of making the gift.
The payment of tax due on heritable property (e.g., houses and land) can generally settled by instalments over 10 years. However, once it is sold, the tax must be paid immediately from the proceeds of the sale.
The payment of tax on non inheritable property must be paid immediately.
The recipient is required to report the gift within 1 year of the donor's death.