Making gifts throughout your lifetime is an effective way to ensure that you are leaving as much behind to your loved ones as possible whilst also helping to mitigate your exposure to Inheritance Tax. In this regard, there is an annual exemption of £3,000 which can be rolled forward up to one tax year. For marriage or civil partnership celebrations, you can give up to £5,000 depending on your relationship to the giftee.
In addition, small gifts of up to £250 can be made to anyone free of Inheritance Tax.
You can also make gifts out of surplus income Stevie Heafford, Tax Partner at HW Fisher explains the three rules to keep in mind.
What is surplus income?
Surplus income is any income that is leftover once all of your outgoings have been paid. Remember your income isn’t only employment earnings and pension payments, it also includes any monies that you receive in the form of interest, ISAs, dividends and rental income.
If you can afford to make regular financial gifts without it affecting your everyday lifestyle, the most common next step is to set up a regular payment plan through your bank.
What qualifies as a gift out of surplus income?
There are three rules that you need to follow to make sure that your gift out of surplus income will be exempt from Inheritance Tax.
If you’d like to speak to Stevie and discuss your own circumstances, you can get in touch here.