Published On: 8 November 2023

If you’re concerned about managing your estate for Inheritance Tax, one of the simple ways to reduce your Inheritance Tax liability is to gift some of it away before you die. And with the festival season fast approaching, it’s a chance to spread some financial joy, whilst reducing the value of your estate.

Each year, you have an allowance that’s immediately exempt from Inheritance Tax of up to £3,000. You can gift this money to anyone and in any way. So, if you have six grandchildren, you could give them £500 each, for example.

You can also give any number of gifts of up to £250 to anybody you like unless they’ve already received part of your annual £3,000 allowance.

If a family member or friend is getting married or becoming a civil partner, you can make a gift that’s free from Inheritance Tax during the tax year of their marriage. As a parent you can gift up to £5,000 and grandparents can gift up to £2,500. Other donors can gift up to £1,000 tax free.

All gifts between spouses or civil partners are exempt from Inheritance Tax, including on your death.

What about larger gifts?

You can of course gift larger amounts than those which are immediately exempt from Inheritance Tax. These are known as a potentially exempt transfer (PET). They become exempt from Inheritance Tax seven years after the date of the gift, so in the meantime remain ‘potentially’ exempt.

The rules around these larger gifts can be confusing, so please speak to your adviser if you plan to make a significant gift in the next few months. You can also download our guide to Inheritance Tax planning from our website for more information.

What constitutes a gift?

Gifts are anything of value that you give to someone else. They include cash, personal goods such as jewellery, household items, property or land and stocks and shares.

A gift could also be the difference in price if you sell something for less than it’s worth. For example, if you sell your car to your grandchild for half its value, the market value of the car would be considered the value of the gift – not the price at which you sold it to them.

Are you ready to make the most of your estate and reduce Inheritance Tax? Speak to one of our experts to plan your legacy wisely by calling 01420 83517

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