Potentially Exempt Transfer
(PET)
A PET is a gift made by an individual
to other individuals or certain types of trust. If the donor survives
for 7 years after the gift is made, no Inheritance Tax is payable in respect
of that gift. If death occurs within 7 years, tax is payable to the extent
that the total of all PETs in the previous 7 years exceeds the nil rate
band.
In addition, there is a sliding scale
(called Tapering Relief), whereby any tax due on the PETs is further reduced,
if they were made between 3 and 7 years beforehand. This only applies
if the value of the PETs exceeds the nil rate band.
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