Inheritance Tax: Gifts

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In this blog, FMB Chartered Financial Planner, Charlie Rigg, looks at the option of gifting to potentially reduce your inheritance tax liability.

“I've had a few discussions with clients recently about their inheritance tax liabilities and how they may want to try to reduce them. One option to consider is gifting. If you don't need the gift (money or property) then you could consider giving it away. Usually, any gifts would be included with your estate if you died within 7 years, but this depends on who you give the gift to, the value of the gift and when it was given.

Gifts between spouses or civil partners are exempt from inheritance tax (as long as they live in the UK permanently).

Gifts to charities or political parties are also exempt from inheritance tax.

There are several allowances available which allow you to give away some money or property free of inheritance tax; I will cover the main ones in this blog:

  • £3,000 Annual exemption: Each tax year you can give away a total of £3,000 worth of gifts without them being added to the value of your estate. This can be to one person, or you can split the £3,000 between several people. You can carry forward any unused annual exemption to the next tax year - but only for one tax year.
  • £250 Small gift allowance: You can give as many gifts of up to £250 per person as you want each tax year, as long as you have not used another allowance on the same person.
  • Gifts out of income: You can make regular gifts out of your income as long it doesn’t affect your standard of living and that it is paid regularly (monthly). There are a few technicalities around what counts as income, so if you decide to go down this route then please check with a financial adviser for a bit more guidance.
  • You can give up to £5,000 to a child, £2,500 to a grandchild or great-grandchild and £1,000 to any other person on the event of their marriage or civil partnership, each tax year.

If you do decide to do some gifting, we would really recommend maintaining a good record of the gifts that you give, including what you gave and who you gave it to, the value of the gift and when you gave it.”

- Charlie Rigg, FMB Chartered Financial Planner

As ever, if you would like to discuss Estate Planning with one of our experts, get in touch today. You can also find more information on our Estate Planning services here.

Please note that the Financial Conduct Authority (FCA) does not regulate Will writing, tax and trust advice and certain forms of Estate Planning.

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