Thinking of making a gift to someone this Christmas
- AuthorChloe Hammond
Thinking of making a gift to someone this Christmas…Have you thought about Inheritance Tax?
Gifts are classified as anything which has value, for example, property, possessions and money, or anything which causes loss in value when transferred, for example, if your home is transferred to your child for less than it is worth.
Each person is entitled to an Annual Exemption of £3,000 per tax year (6 April – 5 April) to offset against gifts. Any unused Annual Exemption can be carried over to the next tax year. However, this can only be carried over for one year.
If you make gifts to your spouse or civil partner within your lifetime, there will be no Inheritance Tax to pay provided your spouse permanently resides in the UK. You can make small gifts of up to £250 per person, for example, birthday and Christmas presents. You can also make limited wedding or civil ceremony gifts, payments towards another person’s living costs, for example, an elderly relative or a child under 18, and gifts to charities and political parties, tax free.
Any gifts made in the 7 years before your death, which total more than your nil rate band, will be liable to Inheritance Tax charged at 40%. There is a sliding scale known as ‘taper relief’, which applies to gifts made in the 3 – 7 years before your death, which can reduce the tax due. This tax may have to be paid by the recipient of the gift, or by your executors.
If you have any questions in relation to Inheritance Tax, or you would like any further information, please do not hesitate to contact one of our Wills, Trusts and Probate specialists. I am based in our Colchester office and can be contacted on 01206 217350 or firstname.lastname@example.org.