Inheritance gifting – a refresher

When thinking about how to minimise Inheritance Tax (IHT) your family will have to pay when you’re gone, don’t overlook opportunities such as gift exemptions.

 

IHT-free gifts

Each financial year you can make gifts of up £3,000 (in total, not per recipient). If you don’t use this in one tax year, you can carry over any leftover allowance to the next year. If you do this, you must use up all your allowance in that tax year; you can’t accumulate several years’ worth of allowance and use it up in a single gift.

 

In addition:

  • Gifts of up to £250 per person per financial year to any number of people
  • Each parent of a bride or groom can give up to £5,000; grandparents or other relatives can give up to £2,500 and any well-wisher can give £1,000
  • Gifts to registered charities and political parties are also exempt from IHT.

 

Gifting from surplus income

If you have enough income to maintain your usual standard of living, you can make gifts from your surplus income – this could include paying a regular amount into your child’s savings account. You’ll need to keep good records. The gift will only qualify for exemption if it is part of a regular pattern of giving and you can demonstrate that your normal standard of living hasn’t been affected.

 

During your lifetime

Many families consider giving assets away during their lifetime, these are called ‘potentially exempt transfers.’ You must outlive the gift by seven years for it not to be counted as part of your estate. If you die within seven years and the gifts are worth more than the nil-rate band, taper relief applies.

Gifts must be outright and you can’t get any benefit from them. For example, if you were to gift your home, but continue to live there without paying a commercial rent, HMRC would consider this to be a ‘gift with reservation’ and include the value as part of your estate.

 

Take sensible steps

Sensible tax planning can help to reduce the amount of tax you pay and safeguard your wealth for the future. We can help – please get in touch.

 

Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from taxation, are subject to change. The Financial Conduct Authority does not regulate tax planning. The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.