The pros and cons of a lesser-known IHT exemption

We are all familiar with the £3,000 annual exemption from inheritance tax (IHT). At least, we should be – it has been £3,000 since 1981. Had it kept pace with the retail prices index (RPI), it would be around £9,000 by now. But there is another exemption available that can, in effect, automatically keep pace with inflation – the normal expenditure out of income exemption. This is perhaps one of the more useful exemptions taxpayers have at their disposal and yet it is probably one of the least used. Exempt transfer Section 21(1) of the IHT Act 1984 states that a transfer of value is ...