Christmas Gifting & Inheritance Tax

Image of counting money re Stamp Duty refund

In her latest Timms Blog, Wills and Probate Solicitor, Charlotte Day discusses “Inheritance Tax & Christmas Gifting”…

With Christmas fast approaching it’s almost time to think about presents for your loved ones (unless you usually leave it until Christmas Eve, in which case you still have a bit of time!).

It is also a good time of year to do some estate planning, as you may be able to use Christmas gifting to reduce your liability to Inheritance Tax. If you don’t have a taxable estate, then it may just be reassuring to know what the rules are so you can choose the appropriate way to gift.

So, how much can you gift within the rules?

 Gifts of £250

Individuals can make as many gifts of £250 to as many (different) people as they want.

Annual Allowance

You can also give away up to £3,000 every tax year using your Annual Allowance.

If you did not make any gifts in the last tax year, or if you did not use the full allowance, then you can ‘pull forward’ any unused allowance to the current tax year. For a married couple, this could mean that they could gift up to £6,000 each.

Gifts using the Annual Allowance do not have to be to one individual. It is the cumulative total of the gifts that matters.

Christmas, Weddings and Civil Partnership Gifts

Christmas is a very popular time of year for a festive wedding or civil partnership, and again an opportune time to make a gift to the happy couple. Gifts in consideration of marriage or a civil partnership can be made as follows:

  • £5,000 to your children
  • £2,500 to your grandchildren or great grandchildren
  • £1,000 to any other person

Inheritance Tax – The 7 Year Rule

If you survive 7 years from the date of making a gift outside of the permitted allowances, then usually the gifts will not cause a problem. However, it is important to seek some legal advice as it could still impact your inheritance tax position, or there might be other factors that need discussing.

Conclusion

It is essential that you do not cause yourself hardship when making gifts. Careful thought needs to be given when making gifts on behalf of someone who may lack mental capacity (i.e. an Attorney on behalf of the donor). Equally, if you can foresee that you are going to need to start paying for care then consideration should be given to the deliberate deprivation of capital rules.

Therefore, it is always advisable to seek some legal advice before making any substantial gifts to ensure that everyone has a Merry Christmas.

If you would like further advice, please contact Charlotte Day on 01283 561 531 or via email at c.day@timms-law.com. Alternatively visit the Wills & Probate section of our website here.

 

Charlotte Day

November 2021

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