With Christmas fast approaching, rather than brave the crowds of last minute Christmas shoppers, you may wish to consider gifting cash instead this year. Wills, Trusts & Probate specialist, Stephanie Chung, discusses the added benefits you can gain by gifting cash which could reduce your inheritance tax.
Christmas songs fill the air and the smell of mulled wine and mince pies drifts all around – with Christmas just around the corner, panic about what to give your loved ones may well have started to set in.
Rather than brave the crowds of last minute Christmas shoppers, you may wish to consider gifting cash instead this year.
As well as the joy of giving a gift of cash at Christmas, you can also reap the added benefits of reducing your inheritance tax (IHT) bill as lifetime gifts attract a number of exemptions.
Here is a brief look at different ways you may like to consider when gifting this festive period:
- Small Gifts – You can give small gifts worth up to £250 to anybody each tax year – this could be an ideal way to cover many of your Christmas presents this year.
- Annual Exemption – Everyone has an annual gift allowance of £3000 so this might cover some larger Christmas gifts which are more than £250 but less than £3,000. If you did not use the full £3,000 last year, you are able to carry it forward to the current tax year meaning you could potentially gift a maximum of £6,000.
- Gifts out of income – Gifts made out of your surplus income may be exempt from IHT. There must be a regular pattern of gifting, so this exemption could be appropriate to cover Christmas gifts that you make each year. Such gifts must not change your normal standard of living.
- Gifts between spouses or civil partners – Your spouse or civil partner may be the main recipient of your Christmas gifting and such gifts of any amount are also free from IHT. There are different rules for non-married partners.
- Gifts in anticipation of a Wedding or Civil Partnerships – Regardless of what time of year the Wedding or Civil Partnership is, parents of the bride, groom or partners can give £5,000 free from tax. Grandparents or other relatives can give £2,500. Anyone else can give up to £1,000 free from IHT.
- Gifts to charities and political parties – If you decide that you would prefer to make a donation to a charity or a political party – such gifts are generally free from IHT – so long as it is a UK registered charity or political party.
- Potentially Exempt Transfers (PETs) – If your Christmas gifts do not fall in to any of the above categories, you can still make other substantial gifts – so long as you survive 7 years after making such gift and you retain no benefit from them.
Stephanie specialises in Wills (including high net worth clients); Attorneyships (both Lasting Powers of Attorney and Enduring Powers of Attorney); and advising clients in relation to Inheritance Tax.
To discuss how Stephanie can support you, you can make an enquiry by calling 0114 204 4616 or emailing enquiries@howellsllp.com
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