Inheritance tax and gifting question..

matt100

matt100

matt100

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This is perhaps straightforward but I can't find a straight answer.

Put simply, I'm an only child, my dad died earlier this year and my mum is quite unwell.

Which is to say anything she gifts sadly I very much expect will fall within the 7 year rule.

However, the total estate will be under the threshold of £325k.

So does the 7 year thing even matter? Like could there ever be any tax if I'm likely to inherit under the threshold?
 
I absolutely hate doing this as it will slowly erode communities like this, but here's ChatGPT's response, empathy and all:

I’m sorry to hear about your dad, and that your mum isn’t well. I can give you a clear breakdown — and the good news is that in your situation, the seven-year rule probably won’t matter.



Key Points on Inheritance Tax (IHT):​


  1. Nil-Rate Band (NRB)
    • Everyone has a £325,000 allowance (the "nil-rate band").
    • Below this, no inheritance tax is due.
    • Above this, the excess is taxed at 40% (subject to other reliefs/allowances).
  2. Gifts & the Seven-Year Rule
    • If someone gives away more than £325,000 in the seven years before they die, those gifts may be counted back into the estate ("potentially exempt transfers").
    • If death occurs within seven years of making a gift, the gift reduces the nil-rate band. If death is after seven years, the gift falls outside the estate entirely.
  3. Your Situation
    • You say your mum’s entire estate, even counting gifts, will be under £325,000.
    • That means no inheritance tax will be due anyway.
    • The seven-year rule only “bites” if the estate + gifts exceeds £325k.
  4. Residence Nil-Rate Band (RNRB)
    • If your mum leaves her home to you, there may also be an extra allowance (currently up to £175,000). That means up to £500,000 could be passed free of IHT in total — but in your case the estate value already sits below the basic £325k, so the RNRB is not even needed.


✅ Answer in plain English:
If the total value of your mum’s estate (including any gifts in the last 7 years) stays under £325,000, inheritance tax won’t be payable. So the 7-year rule is irrelevant in your case — it only comes into play if the estate + gifts is more than the nil-rate band.



Would you like me to also explain what happens if your mum’s estate turns out to be a bit higher (say close to £400k) — including how taper relief and the extra allowances work? That way you’d know the full picture in case things change.
 
Diddums said:
I absolutely hate doing this as it will slowly erode communities like this, but here's ChatGPT's response, empathy and all:

I’m sorry to hear about your dad, and that your mum isn’t well. I can give you a clear breakdown — and the good news is that in your situation, the seven-year rule probably won’t matter.



Key Points on Inheritance Tax (IHT):​


  1. Nil-Rate Band (NRB)
    • Everyone has a £325,000 allowance (the "nil-rate band").
    • Below this, no inheritance tax is due.
    • Above this, the excess is taxed at 40% (subject to other reliefs/allowances).
  2. Gifts & the Seven-Year Rule
    • If someone gives away more than £325,000 in the seven years before they die, those gifts may be counted back into the estate ("potentially exempt transfers").
    • If death occurs within seven years of making a gift, the gift reduces the nil-rate band. If death is after seven years, the gift falls outside the estate entirely.
  3. Your Situation
    • You say your mum’s entire estate, even counting gifts, will be under £325,000.
    • That means no inheritance tax will be due anyway.
    • The seven-year rule only “bites” if the estate + gifts exceeds £325k.
  4. Residence Nil-Rate Band (RNRB)
    • If your mum leaves her home to you, there may also be an extra allowance (currently up to £175,000). That means up to £500,000 could be passed free of IHT in total — but in your case the estate value already sits below the basic £325k, so the RNRB is not even needed.


✅ Answer in plain English:
If the total value of your mum’s estate (including any gifts in the last 7 years) stays under £325,000, inheritance tax won’t be payable. So the 7-year rule is irrelevant in your case — it only comes into play if the estate + gifts is more than the nil-rate band.



Would you like me to also explain what happens if your mum’s estate turns out to be a bit higher (say close to £400k) — including how taper relief and the extra allowances work? That way you’d know the full picture in case things change.
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And this is where GPT falls down because it doesn't consider the inherited property relief from his deceased father meaning the threshold is even higher if the estate value is in their main residence.

[Edit] OP - if the estate value including housing is below £325k anyway, the 7 year rule wont apply. However be careful about deprevation of assets if she needs care in her final years.
 
Last edited:
Thanks chaps and thanks @Diddums for the kind words.

The estate will only ever be around £300k ISH including the house and mum's already receiving care in the form of 4x visits per day and me doing a 500 mile round trip every Saturday (if you see a 335d touring making very urgent progress on the M1 on a Saturday with a plate that starts M100... That's me :)) and I don't see her going into full time care, I don't think she'd have it tbh.

So that's all clear.. for what it's worth I don't mind paying tax and I'm fairly militant that I'd support 100% IHT but we are where we are, I'm not paying more than I have to.. I just think we all should have to pay more :) level playing field and all that.
 
Sorry to hear about your parents.

I don't think you will have any issue with needing to pay IHT. Assuming your parents were married and your father left everything to your mother, then her estate will also benefit from his IHT allowance. If the estate includes their home and it's being left to you (their child) then you are probably looking at a £1M total allowance before you need to pay IHT. Having said that, it won't do any harm for your mother to gift you some money now.
 
matt100 said:
Thanks. It's wild that this is all so complicated/opaque. I swear any time I go within 100m of HMRC I end up confused.. and I'm a smart guy! :cry:
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IHT can be a divisive topic. There was a lot of support amongst Tories for getting rid of it, whereas Labour has so far made some tweaks and the right wing press keep hyping up scare stories e.g. that Labour will be taking your home when you die. Personally I think the current limits are probably a reasonable approach.
 
Mr Badger said:
IHT can be a divisive topic. There was a lot of support amongst Tories for getting rid of it, whereas Labour has so far made some tweaks and the right wing press keep hyping up scare stories e.g. that Labour will be taking your home when you die. Personally I think the current limits are probably a reasonable approach.
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My mum said "you can have it before Rachel reeves gets it"

She and my dad are/we're both those northern working class minimum wages votes against their own interests types of Tories.

Shes not totally impressed that I'm a borderline communist.
 
there's an "annual exemption" of 3K of gifts, maybe that's worth considering.
there's also Informal Gratuitous Care, my mum passed away just before last christmas and my dad needs both formal and informal care, so my brother who's live the nearest is using this.
Kinda helps that he's taken early retirement and it's recorded as his only income.
www.gov.uk

OPG’s approach to family care payments (web version)

www.gov.uk www.gov.uk
 
If the value of the estate is below the nil rate band, which is probably £1m if it includes the amount transferred from your dad to your mum and the estate includes the family home, then you’ll not need to pay anything. However, this is a complex area and you may nevertheless want to seek professional advice.

But you’re probably fine.

But I didn’t tell you that.

Source: am CTA qualified.
 
Lol.. none of this is helped by me not being a basic rate tax payer and having an endless argument with HMRC about my PAYE tax code. Humble brag.
 
Vonhelmet said:
If the value of the estate is below the nil rate band, which is probably £1m if it includes the amount transferred from your dad to your mum and the estate includes the family home, then you’ll not need to pay anything. However, this is a complex area and you may nevertheless want to seek professional advice.

But you’re probably fine.

But I didn’t tell you that.

Source: am CTA qualified.
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So I really need advice?

Like do I need to pay for advice if I'm confident that the estate is under £325k?

Because I am 1000% confident of that, having dealt with my dads affairs and having LPA on mum (now) and now paying all her bills/having apps access for her bank accounts etc (to pay me back for the care bills I'm paying if nothing else) I'm totally sure of the value of it all.

In fact, it would have been substantially waaaay under the limit if it weren't for the fact that my dad in short order got diagnosed with mesothelioma, got government compo of £140k ish then promptly had a stroke so he couldn't spend any of it because he couldn't talk and then died.. so there's this wad of cash I'm trying to ferret into corners for her..

Basically it won't go up and it won't go down either.
 
matt100 said:
So I really need advice?

Like do I need to pay for advice if I'm confident that the estate is under £325k?

Because I am 1000% confident of that, having dealt with my dads affairs and having LPA on mum (now) and now paying all her bills/having apps access for her bank accounts etc (to pay me back for the care bills I'm paying if nothing else) I'm totally sure of the value of it all.

In fact, it would have been substantially waaaay under the limit if it weren't for the fact that my dad in short order got diagnosed with mesothelioma, got government compo of £140k ish then promptly had a stroke so he couldn't spend any of it because he couldn't talk and then died.. so there's this wad of cash I'm trying to ferret into corners for her..

Basically it won't go up and it won't go down either.
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Haha, no, I don’t think you certainly need advice if things are as simple as you’ve said. I’m just so conditioned to never say for certain one way or another :cry: The answer to basically any tax question is “it depends”, so I don’t want to say definitely one way or another. I wouldn’t be worried about it if I were you, though.
 
Vonhelmet said:
Haha, no, I don’t think you certainly need advice if things are as simple as you’ve said. I’m just so conditioned to never say for certain one way or another :cry: The answer to basically any tax question is “it depends”, so I don’t want to say definitely one way or another. I wouldn’t be worried about it if I were you, though.
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Yeah that's like my work life where I have to say "subject to approval and to be clear the price you sell for it your business" at the end of every email just to be safe :cry:
 
matt100 said:
Yeah that's like my work life where I have to say "subject to approval and to be clear the price you sell for it your business" at the end of every email just to be safe :cry:
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Although in this situation people aren't offering investment advice or recommendations about the future. They are (hopefully) just trying to explain the law as it currently stands.
 
Sorry about your father

I'm not expert but my father in law passed last year and my MIL a few years prior

He had taken legal advice around IHT and had made provisions (including names on deeds for the property and his will). The excruciating pain of dealing with various departments, HMRC and even the solicitors we appointed was horrific, especially at a time when my wife and sister were still very much grieving

Even with all that in place and appointing a specialist tax and inheritance solicitor they still ****** it up. My SIL said it did sound right, spoke to someone she knew, they challenged the solicitor who, basically said "oh, yes, you're right here's a bill for extra time checking and confirming we were wrong"

Obviously that didn't get paid

HMRC then shifted gear from slow to glacial

Long winded rant to get to saying if your mum doesn't have a will in place, please get one and power of attorney. Not easy conversations but will make things slightly less painful.in the future.

Hope it's not something you need to worry about for a long time :)
 
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