Gifting

Gifting

As part of a plan to reduce your Inheritance Tax (IHT) liability, you may consider making gifts to your loved ones during your lifetime. You will also have the added pleasure of seeing them enjoy your generosity. Whilst this is both a thoughtful and rewarding idea, it is important to consider how these gifts will affect your estate after you are gone.

Whilst nobody can tell how you much to gift away, or even who you should gift your money to, there are possible implications.

If you make a gift and then survive seven years, the gift is deemed to no longer remain a part of your estate and will not be considered for IHT purposes after you pass away. However, should you make a significant gift and pass away inside of the seven years, your gift may be liable for inheritance tax.

The rate for IHT currently stands at 40%. When you pass away, the total value of your estate is accumulated. If this value is above the nil rate band of £325,000p, there may be inheritance tax to pay.

There are alternative methods for gifting in life. Every tax year, you have annual gift exemptions of £3,000, regardless of the seven year rule. If this allowance is not used, then it may be carried forward by one year. You can also make as many small gifts of up to £250 as you wish. You may also make gifts in contemplation of marriage which shall not be accountable for inheritance tax purposes. Other gifts which shall not be counted for tax purposes are gifts to charities, gifts to political parties, gifts for national purposes and gifts for public benefit.

Finally you may consider gifting away excess income over expenditure. However, you need to take great care here as there are strict terms and recording procedures for this.

Regular controlled gifting may be part of an overall strategy to reduce the IHT liability on your estate when you pass away.

Should you have any queries about gifting, or if you would like a Consultant to visit, please click here.

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