MAKE UNLIMITED SMALL GIFTS
ADAM WALLER, tax partner at accountancy firm PwC, says: ‘Known as a “use it or lose it” allowance, the £250 small gift exemption means you can make multiple gifts of up to £250 every year free from inheritance tax.
‘You can make these gifts to as many different people as you like and they don’t count towards the annual £3,000 gift exemption (explained below) — as long as you don’t give that money to the same person.
‘There are some things to watch out for. The £250 gift relief is “all or nothing”, which means that if you make several small gifts over the course of the year that add up to more than £250, they may not be free from inheritance tax.
‘For example, if you make a gift to your grandchild of £200 this Easter, plus another £100 when they go back school in September, neither of these payments would qualify for tax relief because the total of £300 given to one individual in the tax year would exceed the £250 limit. This means the payments could be included in the total value of your estate if you pass away within seven years, which is subject to inheritance tax.
‘However, giving £200 and then £50 would be fine, as it doesn’t exceed the limit.
‘The small gift relief is a good way to get started but it is very important to keep a record of all gifts that you make including the date, value, and who received them, to prevent any confusion in the future.’