Order of gifts

We act for an elderly client who makes regular annual charitable donations and claims gift aid relief on them. He also makes regular and recurring non-charitable donations including an allowance to his daughter.

In considering the “gifts out of income” exemptions for inheritance tax which come first in the calculation to work out whether his income remaining was enough to live on? To put it another way: do the charitable donations reduce his income thereby putting the non-charitable ones at risk or do we deduct those non-charitable ones first?

Readers will see that if we are able to adopt the second course the charitable ones will cause no problem because they are exempt from inheritance tax.

Query 18 399– Grandad

Reply from Digby Bew

Potentially the inheritance tax exemption for “normal expenditure out of income” in IHTA 1984 s 21 is...