The gift of giving


For those willing and able to make them, gifts can be extremely powerful, and many parents and grandparents want and intend to gift as a way of helping family.


Whilst it is not for everyone, gifting can leave a financial legacy either during your lifetime or afterwards. For those who are thinking of gifting, lifetime gifts can give a great sense of satisfaction in order that you can witness the recipient receive and use the funds that you have provided.


Gifting is also an extremely useful way of Inheritance tax (IHT) planning. However, it is apparent that despite a lot of knowledge on the ‘7 year clock’ that applies to Potentially Exempt Transfers (PETs) there is sometimes confusion on other gifts that you are able to make.


There are a number of lifetime gifts that are available which are listed below:


Annual exemption Annual gifts of up to £3,000 can be made and are instantly outside of your estate. If the previous year’s gift was not (fully) used it can be carried forward.


Small gifts As the name suggests, gifts of up to £250 can be made to any number of people in the same tax year.


Gifts in consideration of marriage or civil partnership Gifts can be made in relation to any


one marriage as follows: nEach parent can gift £5,000 nEach grandparent can gift £2,500 nAny other person can give £1,000


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Normal expenditure out of income Gifts can be made out of income as part of your normal expenditure as long as the following three


conditions are met: nIt must be out of income, not out of capital


n It must be a regular gift nIt must not reduce the standard of


living of the donor (the person who has made the gift)


Naturally this requires more thought and planning than some of the other gifts listed in this article, but this can be highly effective.


Potentially Exempt Transfers (PETs) You can of course make gifts of greater value than those shown above, and these would typically be classified as a Potentially Exempt Transfer (PET). These gifts are called potentially exempt transfers as you have to survive seven years from making the gift for it to fall outside of your estate.


If you were making gifts in this manner we strongly advise that full records should be written down in order that your estate can be effectively managed, and to provide transparency.


Whilst the above covers lifetime gifts, there are other gifts on death


or during lifetime that can avoid IHT. nGifts between spouses (and civil partners)


nGifts to charity nGifts to political parties


nGifts for national purpose i.e. gifts to a museum or the National Trust


Gifts and planning Whilst the above gives some guidance on gifts that can be made, there are important considerations that mean advice in these areas is


strongly recommended. nCan you afford to gift now? nWill you have sufficient capital to last your lifetime after the gift?


nAre there capital gains tax (CGT) considerations on making gifts of your assets?


nIs gifting the right strategy or should you look at other means of reducing your IHT liability?


Finally, gifts may not always be monetary and many of our clients give their time to look after grandchildren or take their families away on holiday.


At Old Mill we are uniquely placed to give advice on these areas, with specialists in tax and financial planning matters. Please call us if you would like a review of your Inheritance Tax position.


Would you like to know more? Contact Michael Bagg on 01935 709338 or email


michael.bagg@oldmillgroup.co.uk


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