Tax-efficient way to make presents felt

THERE ARE some — occasionally overlooked — exemptions applicable to lifetime giving which can help preserve an individual’s inheritance tax allowance on death. Firstly, there is the £3,000 individual IHT allowance on gifts (which can be money, property or possessions) made during the tax year. A married couple can make up to £6,000 per year in lifetime gifts. Any unused exemption from the previous year can be carried forward, which could bring the couple’s combined allowance to £12,000 — but there can be no carry-forward beyond one year.

There is no limit on the number of small gifts of up to £250 — each to a different recipient — which can be made in a tax year and there is an exemption for wedding gifts of up to £1,000 per person (£2,500 for a grandchild or great-grandchild, £5,000 for a child). Also exempt are gifts to charities and to political parties.

Normal gifts out of income are allowable, provided you can maintain your standard of living after making the gift. This is potentially very useful, say, for paying education fees for a grandchild. The key here is maintaining a paper trail and not discarding all those old bank statements.

Carolyn Addleman is director of legacies at JNF UK, 020 8732 6126 carolyn@kkl.org.uk