In the event of your death, your estate – that is, the assets and property that you possess – may be subject to inheritance tax if it is worth over £312,000. Importantly, gifts and asset transfers during the seven years leading up to your death can be included as part of the value of your estate. Furthermore, there are many exemptions and special conditions concerning gifts when it comes to inheritance tax. As such, inheritance tax gifts can be an important factor in managing your estate to ensure that the effects of inheritance tax will be mitigated on the inheritance that you leave to your family.
- There is an annual gift exemption of £3,000 for gifts.
- There is a small gifts exemption of £250 per person per year.
- Wedding gifts have varying sizes of exemption depending on your relationship with the newly wedded couple.
- Political party and charity donations are exempt.
- Potentially exempt transfers cover all gifts and transfers in the seven years leading up to your death that are not covered by other exemptions or conditions. These gifts will be subject to inheritance tax, but the rate of taxation on them reduces as years pass since they were given, and if you survive for seven years after the gift is made, it becomes fully exempt.
- Gifts with reservation are those gifts which you still draw a benefit from – such as a gift of your home to your children while you continue to live there without paying rent. These gifts remain subject to inheritance tax.
For more information on inheritance tax gifts and advice on managing your estate to mitigate the effects of taxation, fill out our online enquiry form and get in touch with qualified UK financial consultants who are offering a free and no-obligation initial consultation.