Thinking about making a gift to someone this Christmas?
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It won’t be long before Christmas is upon us once more and it is easy to focus on the spirit of giving during the festive season. But do you know what you’ll give your family and friends this year? Why not take advantage of the Inheritance Tax reliefs available to you.
Many people choose to make gifts during their lifetime for many different reasons. It may be that you want to help your child with the purchase of their first home, or you may want to give them a gift for a special occasion such as Birthdays and Christmas. By making gifts and giving away some of your assets during your lifetime it is possible to reduce the amount of inheritance tax due on your death. Therefore, as part of your tax planning strategy, you may consider making extra gifts this Christmas.
Any one person has a £3,000 gift allowance each tax year. This is known as your annual exemption. This can be either as a single gift or as multiply gifts adding up to that amount. This means you can give away assets or cash up to a total of £3,000 a year without it being added to the value of your estate for Inheritance Tax purposes. There’s an added benefit if the allowance is not fully used as the remaining balance can be carried forward to the following year. It can only be used in the next tax year and can’t be carried over any further.
In addition, small gifts of up to £250 each can be made to as many individuals as you wish in any one tax year provided they have not already received a gift of your whole £3,000 annual exemption. None of these small gifts are subject to Inheritance Tax.
If giving to charity is important to you this Christmas, it’s worth knowing that any gift to charity is exempt from Inheritance Tax. You can also cut the Inheritance Tax payable on the rest of your estate from 40% to 36%, if you leave at least 10% of your net estate to a charity.
If you are thinking about giving away more than your yearly allowance, it is important to know the Inheritance Tax implications it may have on your estate when you pass away. Provided that you survive for 7 years after making the gift, your estate will not have to pay Inheritance Tax on any of the assets or cash given away. However, if you were to pass away before the 7 year period, there is a potential 40% tax liability.
If you would like further advice on estate planning then please feel free to contact our expert solicitors in our Wills and Probate team on 0800 389 7093. Alternatively you can visit our wills and probate services page here or complete the form linked here and we will call you back.