30 Jan 2024
Many taxpayers are aware that there is an annual inheritance tax exemption of £3,000 for gifts, this can be carried forward to the following tax year if not used to make a maximum gift of £6,000. You can also give as many gifts of up to £250 per person as you want during the tax year but only if you haven’t used another exemption on the same person and there are also special allowances for gifts made at a wedding or civil ceremony. These gifts are ignored in the event of the donor’s demise within 7 years of making the gift.
It is also possible for wealthier taxpayers to make tax exempt gifts and payments that are paid out of income. With proper planning this can be a useful tool for example to enable grandparents to help pay school fees for their grandchildren.
However, careful consideration has to be given to ensure that these payments form part of the transferor’s normal expenditure and is made out of income and not out of capital. The transferor must also ensure that they are left with enough income for them to maintain their normal standard of living after giving the gift.
If you need tax advice, please give us a call on 01380 723692.