Normal Expenditure Out Of Income Exemption


Normal Expenditure Out Of Income Exemption (UK Inheritance Tax)

Inheritance Tax is a CAPITAL TAX. Therefore if an individual makes gifts that are part of their normal expenditure out of INCOME and this expenditure does NOT affect their STANDARD OF LIVING, then these gifts will be EXEMPT from INHERITANCE TAX.

To be considered NORMAL expenditure, there must be a REGULAR PATTERN of giving.

A good example of this is when a grandparent makes regularly payments for school fees for grandchildren. As long as the money used to pay the school fees is INCOME and this doesn’t affect the donor’s standard of living, then since a regular pattern of payment is established, the gift would be EXEMPT from INHERITANCE TAX.