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Gifting at Christmas – How about using your inheritance tax gift allowances?

Inheritance tax is payable on your estate on death and on certain gifts made during your lifetime.

The amount of tax you pay is usually 40%. We all have an amount we can give away without paying tax – this allowance is currently £325,000, and available on death, provided it has not been set against any gifts made in the preceding 7 years. If you make a gift during your lifetime – then there will be no IHT to pay however generous the gifts are, provided you survive 7 years of making the gift.  If you die within this period the gifts are taken into account although the tax you pay may be tapered.

However the government allows you to make certain gifts that are exempt from inheritance tax (IHT) in addition to other gifts you may make during your lifetime.

These are:

  • £3,000 annual exemption – up to this amount and if you have not used this allowance the previous tax year then you can roll it forward one year only, gifting £6,000 instead of £3,000.
  • £250  small gift exemption  – you can give up to this amount  to as many people as you want; but not to someone who has already received  the whole of the £3,000 gift allowance  – useful if you have lots of grandchildren.
  • Gifts to UK charities are exempt from IHT.
  • £5,000 - up to this amount for wedding gifts from parents; £2500 from grandparents provided the wedding has not taken place yet and that it happens.

What about a gift for you?

If you have not done so already, why not make a will and give yourself the peace of mind that you have ensured that those you wish to benefit from your estate do so.  

For advice on Inheritance Tax Planning please contact our private client team on 020 8363 4444.

Please note this blog and any information contained in it is for guidance purposes in it, facts are correct at the time of publication.

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