Giving the gift of Inheritance Tax reduction

Are you looking for ways to reduce the slice the taxman will take from your loved ones as Inheritance Tax after your passing?

Giving gifts during your lifetime can help you do just that. Here are three ideas for cutting Inheritance Tax through gift-giving:

1) Use the annual exemption

It’s a no-brainer to take advantage of the so-called annual exemption, under which you don’t pay Inheritance Tax on up to £3,000 worth of gifts you have given away in each tax year. Leftover annual exemption can be carried over from one tax year to the next, but the maximum exemption is £6,000. Gifts worth up to £250 can also be given free from Inheritance Tax, as long as certain conditions are met.

2) Wedding gifts

If a relative or friend is planning to tie the knot, it’s worth bearing in mind that wedding gifts don’t count towards the annual exemption. In fact, no Inheritance Tax is due on a wedding or civil partnership gift worth up to:

  • £5,000 given to a child
  • £2,500 given to a grandchild or great-grandchild
  • £1,000 given to anyone else

The gift must be given on, or shortly before, the date of the ceremony and if it’s called off the exemption won’t apply.

3) Make donations

Inheritance Tax does not apply to gifts to charities, museums, universities or community amateur sports clubs. The same is true of political parties, though there are some conditions that must be satisfied.

This page of the gov.uk website contains the definition of a gift.

Call us today on 01244 347583 or email info@innesreid.co.uk for guidance on all aspects of Inheritance Tax planning.

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