It’s the season of giving, and I am of course referring to making lifetime gifts using your Inheritance Tax-free allowances! Christmas is a good time for anyone with a prospective inheritance tax problem to consider whether they’ve used their annual allowances for this year. If not, perhaps making some gifts for inheritance tax planning purposes might be in order.
- Each person can give away their ‘annual exemption’ of £3,000 per tax year, completely free of inheritance tax. If you are a couple, you can therefore give your children (or other beneficiaries) up to £6,000, inheritance tax free. You can carry forward any unused annual exemption to the next year, but only for one year.
- You can give away ‘small gifts’ of up to £250 per person, to as many people as you like.
- There is an exemption for ‘normal gifts out of income’. This basically means that you can give away as much income as you like, as long as you are able to maintain your usual standard of living after making the gift. This type of gift needs to be carefully documented, in case it is ever challenged, but the exemption can be extremely valuable for the right client.
- You can also give wedding gifts of £5,000 per child, £2,500 per grandchild or great grandchild and £1,000 for anyone else (HMRC clearly thoroughly disagreeing with the assertion that ‘you can’t put a price on love’.)
Merry Christmas in advance, beneficiaries everywhere – you’re welcome.