Christmas is the season for giving so why not splash out this festive season, spoil your loved ones and get the added benefit of sorting out some inheritance tax planning at the same time?
Every person can give away £3,000 in a tax year without it having any detrimental inheritance tax effect on their estate (which includes property, savings, investments and possessions). And if the previous year’s £3,000 was never used then any unused exemption can be brought forward, which means it is possible to gift £6,000 every two years.
This is an effective way to reduce the capital value of your estate without having to survive a further seven years to make sure the recipients of your gift don’t become liable for inheritance tax (IHT). Multiple small gifts of £250 to different recipients also have no adverse effect.
And if you are feeling particularly generous and have surplus income, you can give all of it away, no matter its value and it will be IHT-free. The key to using this exemption is that there must be an intention to make regular gifts and they must be funded from surplus income that leaves the donor of the gift with sufficient income to maintain his or her living.
Generally gifts between spouses or civil partners are completely free of inheritance tax so there’s no adverse tax reason for buying your loved one that expensive gift!
Like the spouse exemption, gifts to charity are also IHT-free and there can also be income tax benefits for the charity if you elect for Gift Aid.
The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.