Lifetime Gifting

23rd September 2019

Making gifts during your lifetime is an easy and efficient way to reduce your Inheritance Tax (IHT) exposure. 

There are several straightforward existing reliefs:

ANNUAL EXEMPTIONS
Each tax year, you may gift up to £3,000 free of IHT.  If you have not already used last year’s annual exemption, you can do so by making gifts totalling up to £6,000 in the current tax year without any IHT implications.

SMALL GIFTS
In addition, you may make outright gifts of up to £250 per year to as many individuals as you wish (although the individuals benefiting from the gifts of up to £3,000 cannot also benefit from the £250 gifts).

GIFTS OUT OF EXCESS INCOME
You may also make regular, habitual gifts out of your income, free of IHT, provided they leave you with sufficient income to maintain your usual lifestyle. Bishop Fleming can assist with the appropriate paperwork to put this in place.

Keeping within the limits stated above, it is possible to invest up to £2,880 per annum into a personal pension for a non-working child or grandchild of any age or minor grandchild. The Treasury will add to this basic rate tax to produce a gross investment of £3,600, so there is, effectively, tax relief on the gift. The recipient will be unable to access these funds until they reach age 55 under current pension rules, but this may be an advantage.

GIFTS ON MARRIAGE
You make gifts on marriage free of IHT implications. For a parent the amount is £5,000, as a grandparent the amount is £2,500, or to any other person £1,000.
 
GIFTS TO CHARITY
All gifts to charities are exempt from IHT. Therefore, during your lifetime, you may wish to make charitable gifts of any size out of capital in order to reduce the value of your estate for IHT purposes.

Making larger outright gifts to individuals or to trusts can also be useful tools in mitigating your IHT liability, but in most cases require some more in depth planning to consider the wider implications, both from a tax and a personal wealth perspective.

Bishop Fleming are experienced in providing our clients with this type of advice, offering personalised solutions based on an individual’s situation.  Please contact the tax team or your usually Bishop Fleming contact if you would like to discuss IHT planning in more detail.

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