Lifetime transfers: 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. It can only be carried forward to the next year and cannot be used in any later years. The annual exemption should be applied in the following order
- 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.
Trevor makes the following cash gifts:
- March 2010 - £1,600 to Anne
- June 2010- £2,200 to Brad
- June 2011 - £5,000 to Charlie
The position in each tax year and for each gift is:
Tax year 2009 to 2010
The gift of £1,600 is wholly covered by the current year’s annual exemption and a surplus £1,400 is rolled-over to 2010/2011.
Tax year 2010 to 2011
The gift of £2,200 is wholly covered by the current year’s annual exemption. The unused balance of £800 is rolled over to 2011 to 2012. The surplus of £1,400 from 2009 to 2010 is not used and so is lost.
Tax year 2011 to 2012
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 potentially exempt transfer (IHTM04057).