Are you thinking about gifting your loved ones this Christmas? With the right advice, you can make these gifts tax exempt. This ensures that if you die within the next seven years, the gifts will not be considered part of your estate – and therefore will not be subject to Inheritance Tax.
Here’s how to use your gift allowance this Christmas.
Gifts of £3,000
Firstly, you can give away £3,000 worth of gifts each tax year without the risk of incurring Inheritance Tax. This is known as your annual gift allowance. If you did not use your gift allowance from the last financial year, you can roll it over to this year. A gift is anything of financial value, be it money, property or personal possessions.
In addition to your gift allowance, you are allowed to give ‘exempted gifts’ for special occasions, such as birthdays and Christmas. But there are a couple of catches. Most notably, a Christmas gift must be made out of your normal income, and you must be able to maintain your standard of living after making the gift.
Gifts of £250
You can also gift up to £250 to as many people as you like, provided they have not already received a tax-exempt gift from you this tax year.
Gifts to your spouse and to charity
If you are thinking of gifting your spouse, then you need not worry – gifts between spouses are entirely tax free, so long they live permanently in the UK. In England and Wales, ‘spouse’ means that you are legally married or in a civil partnership. There is no such thing as a ‘common law’ spouse.
Gifts to registered charities are also tax free.
Ask a solicitor
There are various ways to use your gift allowance this Christmas. However, it is a complicated area of the law. Legal advice is strongly recommended before you gift any money, property or possessions. Otherwise you may rely on a gift being tax exempt, only for your loved ones to discover later on that it is subject to Inheritance Tax.
Inheritance Tax is taxed at 40% on non-exempt gifts given within the three years before your death. This means a mistake could prove very costly. To be sure you are complying with the rules, ask us for advice.
Contact us now
If you would like to speak to a specialist solicitor about using your tax allowance this Christmas, our Later Life Planning team can help. We offer accurate and practical legal advice.
To find out more, please call Debbie on Southport 01704 532890 or Liverpool 0151 928 6544 or email firstname.lastname@example.org.