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Question 2 - ‘chargeable value’

The ‘chargeable value’ of a gift is the value of the gift after you’ve deducted any exemptions such as for:

• wedding or civil partnership gifts
• annual exemptions

For example, if the deceased made a single cash gift of £7,000 to someone, the chargeable value of that gift is £4,000. This is the total after deducting the annual Inheritance Tax exemption of £3,000 for gifts.

You can also carry over unused exemption from the previous tax year if the deceased's current year’s exemption has been used up.

On an excepted estate where there is no Inheritance Tax to pay, the phrase ‘chargeable value’ can be confusing. Although you have to enter the chargeable value of all gifts on the form, there will usually be no Inheritance Tax to pay on those gifts.

• Gifts that are exempt from Inheritance Tax

Question 2 - ‘specified transfers’

A ‘specified transfer’ is an outright gift (not into a trust) that the deceased made during their lifetime. They are also known as a ‘lifetime gift’ or a ‘lifetime transfer'. They must be one of the following:

• cash
• stocks, shares and securities listed on a recognised stock exchange
• land - usually houses or buildings
• personal belongings such as clothes, cars, household goods
  

Most gifts are specified transfers.

However, if the deceased made a gift to someone of, for example, unlisted shares this wouldn't be a specified transfer and their estate wouldn't be an excepted estate. In this case, you’d have to fill in a full Inheritance Tax account - form IHT400 - even if the estate is unlikely to owe Inheritance Tax.

• Form IHT400 - Inheritance Tax Account Opens new window

Question 3 - gifts you continue to benefit from

This question is relevant if the deceased made a gift of say, their home or car to someone but continued to benefit from it. For example, if they gave their home to their children but continued to live in it without paying a full market rent. This would be considered a ‘gift with reservation of benefit’ and the estate therefore wouldn't be an excepted estate.

• Inheritance Tax when passing on your home to your children

More useful links

• How to value gifts for Inheritance Tax

• Guidance notes IHT206 for form IHT205 Opens new window

• Guidance notes C3 for form C5 Opens new window

Useful contacts

• Probate and Inheritance Tax Helpline