Did you know that the government is expected to have taken nearly £5 billion in inheritance tax in the last tax year? This is up from just over £2 billion in 2000/2001 (Office of National Statistics). So it is understandable that with inheritance tax at 40% that I spend a lot of my time making clients as tax efficient as possible.
Did you also know that there are annual gift allowances? Although usually small in the grand scheme of things, using these allowances can help you to pass money on (and therefore out of your taxable estate) without any potential future inheritance tax liability. Here is a list of the main ones:
- £3k annual gift allowance
This allows you to gift away £3,000 in each tax year. This is known as your annual exemption. If you didn’t use your previous year’s allowance, you can carry it forward i.e. £6K
- Wedding Gifts
You can gift up to £1,000 as a wedding or civil ceremony gift. If the wedding is your grandchild’s or great grandchild’s you can gift £2,500 per person and £5,000 if it’s your child’s wedding.
- Normal Gifts out of Income
You can give any amount (e.g. for birthdays/Christmas) as long as it is out of your income (e.g. salary/pension/investment income) and it doesn’t affect your standard of living
- Living Costs
You can help another person out with their living costs without it being liable to inheritance tax at some point.
- Small Gifts
You can make as many gifts of up to £250 per recipient during the tax year as long as they haven’t already received one of the previously mentioned gifts.
Before you gift though, it is important that you make sure you can afford to give away the money without affecting your standard of living now and in the future.
Lots of Love
Miss Lolly xxprevious post: Are You One of the UK’s Highest Earners? What To Do About Your Tax If You Are. next post: Are You Missing Out? Millions of People are Missing Out on Free Money from Their Employer.