The gift of money at Christmas
- AuthorLeah Woodnott
Christmas! Yes, that is right, I am thinking about Christmas already! This has been an unusual and unforgettable year and no doubt Christmas 2020 will also be one people will not forget.
At a time where families come together (hopefully, if the Covid-19 restrictions allow), Christmas is a time where often you swap presents with your loved ones. Unfortunately, many families have been financially affected by the economic repercussions of Covid-19 and therefore, now more than ever, may be the right time to consider giving cash gifts to your loved ones, rather than physical presents.
You could help with paying someone’s utility bill, paying a mortgage instalment or even cash for a new car tyre. Whatever the reason, your loved ones may prefer a cash gift this year to give them one less bill to worry about, rather than being bought an item.
When you pass away, your executors (the people that will deal with the administration of your estate) will need to declare any gifts made by you in the last seven years before your passing. Any gifts over your tax threshold will be subject to Inheritance Tax at 40%.
Did you know there is usually no Inheritance Tax to pay on small gifts given at Christmas, so long as they are gifts you make out of your normal income? They are known as “exempt gifts”.
In addition, you can give away gifts of up to £3000 to your loved ones in each tax year (6 April 2020 to 5 April 2021) without them being added to the value of your estate. You are also able to carry forward any unused exemption from the previous year, which could mean you can give a total of £6000 to your loved ones.
It is important that if you do decide to make any cash gifts this Christmas, to ensure that you keep a record of the gift amount, the date the gift was given and to whom.
If you would like to speak to a specialist about leaving tax-exempt gifts this Christmas, please contact our expert Wills, Trust and Probate team for a no obligation 15 minute chat.
I am based in our Colchester office and can be contacted on 01206 217609 or firstname.lastname@example.org.