Glossary · UK
What is Chargeable Lifetime Transfer (CLT)?
A lifetime gift, usually into a discretionary trust, that is immediately chargeable to inheritance tax above the available nil-rate band.
Full Definition
A Chargeable Lifetime Transfer (CLT) is a gift made during your lifetime that is immediately chargeable to inheritance tax, rather than being a potentially exempt transfer. The most common example is a transfer into a discretionary trust or most other relevant property trusts. The value transferred is set against your available nil-rate band of 325,000 (after deducting any chargeable transfers in the previous seven years). Any excess is taxed at the lifetime rate of 20% if the trust pays the tax, or an effective 25% if you, the settlor, pay it, because the tax itself is also a transfer of value. If you die within seven years, the CLT is reassessed at the 40% death rate, with credit given for the lifetime tax already paid and taper relief available on gifts made three to seven years before death. CLTs use up nil-rate band before later transfers and can affect the tax on subsequent gifts and on the death estate. Annual exemptions, such as the 3,000 annual gift exemption, may reduce the chargeable amount. Trustees must report the transfer to HMRC where it exceeds set limits.