Inheritance Tax Act 1984 section 19

Annual exemption

Section 19 provides an annual exemption of £3,000 for lifetime transfers of value, with the ability to carry forward any unused portion for one year.

• Each individual can make transfers of value totalling up to £3,000 per tax year (6 April to 5 April) free of inheritance tax.
• Any unused portion of the £3,000 exemption can be carried forward to the next tax year only, giving a maximum possible exemption of £6,000 in that following year.
• Where transfers exceed the available exemption, the excess is attributed to later transfers first, so that earlier transfers benefit from the exemption; transfers made on the same day share the excess proportionally.
• Potentially exempt transfers (PETs) are initially ignored when applying the annual exemption, but if a PET later becomes chargeable (because the transferor dies within seven years), it is treated as having been made after any non-PET transfers in the same year.