Lifetime giving can be an effective tool for individuals seeking to reduce their Inheritance Tax liabilities on death.
The exemptions available which provide potential relief from Inheritance Tax include:
- An annual exemption of £3,000 per year.
- Wedding gifts up to £1,000 per person ((£5,000 for a child, £2,500 for a grandchild or great-grandchild).
- Small gifts of up to £250 per person.
- Gifts to charities and political parties.
- Payments or help with another person’s living costs, such as an elderly relative or a child under 18.
Gifts made out of Income
This provides an exemption for an individual making gifts out of their income and can be beneficial to those who have excess earnings or pension income. It is important to keep records and it is noted that regular payments will need to be made.
Potentially Exempt Transfers
This allows more substantial gifts to be made and these will be free of Inheritance Tax if the donor lives for 7 years after making the gift. Taper relief is available if the donor dies within the 7 year period, which reduces the charge to Inheritance Tax based on the time period which has passed from making the gift to the date of death.
If you would like any specific advice about making a gift or Inheritance Tax planning, please get in touch.
The views expressed in this article are the personal views of the Author and other professionals may express different views. They may not be the views of Lambert Chapman LLP. The material in the article cannot and should not be considered as exhaustive. Professional advice should be sought in connection with any of the issues contained in the article and the implementation of any actions.