I understand that I can give annual monetary gifts without affecting my inheritance tax position. Is this correct?
Yes it is. Everyone has a £3,000 annual exemption for inheritance tax (IHT). Therefore both yourself and your spouse can each make a gift of £3,000 each tax year f you wish. This means that you could give £3,000 to child "A" and your spouse could give £3,000 to either child "A" or to child "B". It is important to note that if you have not used up your £3,000 exemption from the previous Tax Year then you can bring it forward and therefore gift £6,000 in the current year. This applies only to the last Tax Year so it only works for two Tax Years therefore the maximum you can give is £6,000 if this situation is applicable to you.
Are there any other exemptions?
You should also be aware of something called the Small Gift Exemption whereby it is possible to make an unlimited number of small gifts of up to £250 per recipient.
Additionally, It is also possible to make regular gifts out of income without any IHT charge. Determining what is a reasonable amount depends upon your financial circumstances and whether any gift affects your standard of living. Obviously these are somewhat technical and all of your earnings etc. would have to be looked at.
Finally, if the reason you wish to make a gift is because your child is getting married each parent cam make a marriage gift up to £5,000. Grandparents can also give up to £2,500 each without any IHT liability and friends need not be left out as they can gift up to £1,000 each. We would recommend that you make this gift by way of a cheque so that you have a record of the payment you have made in case the Inland Revenue ever query the situation.
If you are anxious about Inheritance Tax generally it is important to discuss your affairs fully with your solicitor. Should you require any assistance or further advice in respect of the above please contact Leslie Caisley on 0191 232 8628. Leslie is a member of the Law Society Probate Section and he has over 20 years experience of giving IHT advice. He is also a partner in Patterson, Glenton & Stracey Solicitors.
