Pass on your wealth through gifts – without being hit by the taxman
EVERYONE has an annual gift exemption. As a result, you can give away up to £3,000 tax-free each tax year. You can carry forward any unused annual exemption to the next tax year – but only for one year.
EACH tax year you can also give away wedding and civil ceremony gifts of up to £5,000 per child, £2,500 per grandchild or great-grandchild, and up to £1,000 for others. You can use more than one exemption on the same person, so you could make gifts to a grandchild for their birthday (out of the annual £3,000 allowance) and for a wedding present in the same tax year.
GIFTS up to £250 per person can be made during the tax year as long as you have not used up another exemption on the same person.
UNLIMITED gifts can be made from income, for example for birthdays and Christmas. These are exempt from inheritance tax as long as the gifts do not reduce your standard of living. The tax office has form IHT403 which provides an income and expenditure analysis to help determine how much surplus income, after tax, an individual has per tax year. For more details visit gov.uk/inheritance-tax/gifts.
THE Government has just announced a review of the inheritance tax rules. The objective is to simplify them – and in some instances increase the exemptions to make them more meaningful. But any changes might take several years to kick in.