IHTM14144 - Annual exemption: roll over provisions

Any part of the annual exemption which is not used in the tax year is carried forward (rolled-over) into the next tax year and can be used in that year only. It cannot be used in a later year. Accordingly, in applying the annual exemption

• use the annual exemption for the current year first
• then use any part of the previous year's annual exemption not used in that year
• you cannot use any surplus annual exemption from any earlier year.

Example

Trevor makes the following cash gifts:

March 1990 - £1,600 to Anne

June 1990 - £2,200 to Brad

June 1991 - £5,000 to Charlie

The position in each tax year and for each gift is:

Tax year 1989/90

The gift of £1,600 is wholly covered by the annual exemptions and a surplus £1,400 is rolled-over to 1990/91.

Tax year 1990/91

The gift of £2,200 is wholly covered by the current year’s annual exemption. The unused balance of £800 is rolled over to 1991/92. The surplus of £1,400 from 1989/90 is not used and so is lost.

Tax year 1991/92

The £3,000 for the current year and £800 from the previous year are available. So of the £5,000 gift, £3,800 is exempt. The balance of £1,200 is a chargeable PET (IHTM04057).