Christmas gifts and IHT
A question I am frequently asked is about Inheritance tax (IHT) and the most tax efficient way of making financial gifts in your lifetime, especially to children or grandchildren.
Potentially Exempt Transfers are gifts of any value that will be exempt from IHT providing that you live for seven years after making the gift. If you should pass away within the seven years, and the value of the gift is less than the IHT threshold (£325,000), the value of the gift will be added to your estate and the tax deducted out of the estate. If the gift value is more than the threshold, then IHT will need to be paid on its value by the receiver.
Gifts up to the value of £3,000 per person, per tax year are exempt and fall out of your estate. Additionally, if you did not use the previous tax year’s allowance then in the current tax year you will be eligible to gift up to £6,000 per person.
Wedding / Civil Partnership gifts
Providing you make, or promise to make, a gift on or shortly before the ceremony date, wedding and civil partnership gifts will be tax-free. Parents are able to give up to the value of £5,000, grandparents up to £2,500, and anyone else up to £1,000.
Small gifts and regular payments
You are allowed to give up to £250 to as many individuals as you wish in one tax year, providing you have not given them anything under another gift exemption. Regular monthly payments can also be made, such as to pay school or university fees as long as you have enough income left to maintain your normal lifestyle.
Remember to keep records of any gifts you make and note alongside them which exemption you have used.
For further advice contact Alexander Astley at email@example.com