Gifts with added benefits

Did you know that when you help your family financially you could also be reducing the inheritance tax that may be payable when you pass away?

With the inheritance tax threshold, which includes the value of your home, currently £650,000 for married couples and £325,000 for single people, many families are now finding that there is inheritance tax to pay when their loved ones pass away. However, it is possible to reduce the likely bill.

The annual gift allowance

You can give away cash and items worth up to a total of £3,000 a year and the amount will immediately be exempt from inheritance tax. You can carry forward up to £3,000 of unused allowances from the previous year. If you give away more than £3,000 a year, the excess amount will only be exempt from inheritance tax if you live for a further seven years.

Other gifts that are exempt:

  • Gifts of up to £250 to as many people as you want, although not to anyone to whom you have given the £3,000 gift allowance in that year.
  • Wedding gifts to your child worth £5,000 or less, to your grandchild or great-grandchild worth £2,500 or less, or to another relative or friend worth £1,000 or less.
  • Money that pays the living costs of an ex-spouse, elderly dependant or a child under 18 or in full-time education.
  • Excess income, over and above your normal outgoings, that you give away.

Find out more

There are many ways you may be able to reduce the amount of inheritance payable when you pass away. This is a complex area and it is easy to get things wrong. If you are concerned that you may leave your loved ones with an unnecessary tax bill you should talk to one of our professional financial advisers.

Tax advice which contains no investment element is not regulated by the Financial Conduct Authority.