Private Lives - ‘Tis the season for giving


20 December 2018

As this is the time of year that we are thinking about giving and receiving gifts, here is our seasonal reminder of how making lifetime gifts can be an effective way of reducing the value of your estate for Inheritance Tax (IHT) purposes. 

As always, early planning is essential so if you are considering lifetime Inheritance Tax planning, this might be another topic you wish to raise with your family and with the team at Birketts in the New Year. 

Gifts which you survive by seven years

If you make a gift and survive it by seven years then, as long as you have not reserved a benefit in that gift, its value will be outside of your estate for IHT on your death.

Some gifts will not be drawn back into your estate for IHT on your death, even if you do not survive them by seven years:

Annual exemption

You can give away assets up to the value of £3,000 each tax year. You can carry any unused exemption forward one year.

Wedding gifts

You can also make wedding or civil partnership gifts of up to £5,000 for your children, £2,500 for your grandchildren and £1,000 for any other person.

Gifts to charity

You can make as many gifts to charity as you like.

Small gifts 

You can give as many gifts of up to £250 per person as you like (as long as you haven’t used another exemption on that same person already).

Regular gifts out of surplus income

You can make as many regular gifts out of your surplus income as you like. There must be some pattern to the gifts and they must be made out of your ‘surplus’ income. (This exemption is not automatic, rather it is claimed by your executors on your death and so it is important that you keep records of your incomings and outgoings and the gifts made). 

This information provides only a snapshot of some of the things you should consider when making a lifetime gift. The rules surrounding these points are complex and you should always take appropriate legal and financial advice before doing so.

The content of this article is for general information only. For further information please contact Natasha Senior or a member of Birketts' Estate Planning and Wills Team.

This article is from the winter 2018 issue of Private Lives, our newsletter covering the key legal and tax issues that individuals face. To download the latest issue, please visit the newsletter section of our website. Law covered as at November 2018.

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