IHTM14141 - Annual exemption: summary

A person's lifetime gifts are exempt up to a total of £3,000 in an income tax year - 6 April to 5 April the following year.

The exemption applies to

• lifetime gifts by individuals ( IHTM04053)
• lifetime termination of an interest in possession ( IHTM16060) in settled property, and
• apportionments made to persons under IHTA84/S94 (transfers by close companies). ( IHTM14851)

Deemed transfers

IHTA84/S19 (5) disapplies IHTA84/S3 (4) in the case of the annual exemption, so any “deemed” transfer of value (as opposed to an actual transfer of value) such as those under IHTA84/S102 (4) and FA86/S103 (5), cannot benefit from the exemption.

However, this limitation does not apply to the deemed transfers under IHTA84/S52 (termination of an interest in possession) or IHTA84/S94 (transfers by close companies).

Amounts over the exemption level

If a gift (or technically, transfer of value ( IHTM04024)) is more than the amount of the available exemption:

• it is an exempt transfer ( IHTM04026) up to the amount of the available exemption (IHTA84/S2 (2))
• the excess is the chargeable amount of the PET ( IHTM04057) or immediately chargeable transfer ( IHTM04027).

Investigation

You can assume the annual exemption is available as claimed, or unavailable if not claimed, unless there is some positive indication to the contrary.

This is a common area for arithmetic and application error however. You must check any computation provided by the taxpayer, including whether the roll-over provisions ( IHTM14144) have been correctly applied.