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Gifting

There’s usually no IHT to pay on small gifts you make out of your normal income, such as Christmas or birthday presents, which are commonly referred to as ‘exempted gifts’.

There is also no IHT to pay on gifts between spouses or civil partners and you can transfer as you like during your lifetime, as long as they live in the UK permanently.

However, other gifts count towards the value of your estate and you could be charged IHT if you give away more than £325,000 in the seven years before your death.

Gifts include anything that has a value or anything transferred at a loss to a family member, such as the sale of a home to a descendant for less than it is worth. 

You can however, give away £3,000 worth of gifts each tax year without them being added to the value of your estate thanks to the ‘annual exemption’.

If you have any unused annual exemption you can carry it forward to the next year – but only for one year.

Each tax year, you can also give away additional gifts if they relate to special events such as weddings, birthdays or Christmas, or if they support the living costs of another person, such as an elderly relative or a child under 18.

You can give as many gifts of up to £250 per person as you want during the tax year as long as you have not used another exemption on the same person.

If there’s IHT to pay, it’s charged at 40 per cent on gifts given in the three years before you die. Gifts made three to seven years before your death are taxed on a sliding scale known as ‘taper relief’. After seven years the gift will be IHT-free.

https://stca.co.uk/services/individuals/inheritance-tax/