Inheritance Tax Gifts
Inheritance tax may be due on any gifts that you gave in the last seven years of your life if your estate is worth more than £325,000 on your death. However, some gifts may be exempt from inheritance tax even if given within the seven year time period.
Careful gifting in your final years may give you peace of mind in knowing that any gifts made during your lifetime will not subsequently be due for inheritance tax. Gifts given in a suitable way may also help in reducing and avoiding inheritance tax altogether.
Gifts during the final years of your life that may remain exempt from inheritance tax include:
Inheritance tax and wedding gifts
Some wedding gifts may be exempt from inheritance tax. For example:
- Children may be given up to £5000 each, per parent.
- Grandchildren may be given up to £2500 each, per grandparent.
- Anyone else may be given up to £1000 each.
Inheritance tax free wedding gifts can only be given at one wedding per person.
Other Gifts
Figures are given according to amounts allowed during each tax year. Other gifts that could be exempt from inheritance tax include the giving of:
- Up to £250 per year given to any number of people.
- Up to £3000 per year as an annual gift allowance (cannot be given in conjunction with any other gift).
- Gifts given between marriage partners or those in civil parnerships.
Inheritance tax and charity gifts
Gifts to charity are exempt from inheritance tax as are gifts to some national institutions, and major political parties.
Potentially exempt transfers
Gifts that are given over seven years before you pass away are known as potentially exempt transfers, and in most cases will not be liable for inheritance tax. However, if you retain an interest in any gifted assets then your beneficiaries are likely to have to pay inheritance tax in the event of you passing away regardless of when you made the gift. This may be the case if, for example, you give your home to you children but remain living in it without paying full market rent.
Any gifts that are exempt from tax are not counted towards the value of your estate.The £325,000 threshold includes any gifts that are potentially liable for tax that may take your estate over and above that threshold. This means that any gifts you gave may be included in calculating the worth of your estate but only if they are considered potentially taxable gifts.
It is worth keeping a record of any gifts that you do give and stating under which exemption you made the gift, if applicable.
Inheritance tax can be complex. For advice on getting the most out of your assets, and looking after the interests of those you leave behind, speak to the independent inheritance tax planning advice team at one of our partner firms for impartial advice and a free no obligation consultation.
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