The season for giving…how much can I gift at Christmas (without landing myself a tax bill!)
Senior Lawyer, Private Client
Whilst we are all busy preparing for the festive season, many of us will be thinking about what presents we will give to loved ones. For most of us, we will be thinking more about what everyone might have on their wish list… and the very last thought on our minds is inheritance tax (‘IHT’).
HMRC have released guidance on what they define as a gift that can be given at Christmas, without the gift forming part of your estate for IHT purposes.
The guidance from HMRC confirms that each person can make as many ‘small gifts’ at Christmas as they like. HMRC defines small gifts as those where the value is £250 or less per person.
You could also consider using your some or all of your annual allowance of £3,000 to make larger gifts if you wanted to (provided, of course, that you haven’t already used your allowance for this year.) If you’re going to do this, it’s important to remember that this is £3,000 in total, and not per person.
If you make a gift that exceeds your allowances and die within 7 years of making this gift, when your executors are working out the total value of your estate, they may need to declare this to HMRC. It’s important therefore to keep accurate records of the gifts you have given, their value, when you gave them and who you gave them to. There are specific forms that Executors need to use to declare these gifts to HMRC if your estate exceeds your nil rate band.
For very substantial gifts (eg a gift of property), it is very useful to have your solicitor prepare a Deed of Gift to set out all of the details in a legally binding deed. This is excellent evidence for HMRC and useful for your Executors (particularly if you store this with your Will).
The other types of gifts you can make throughout the year without attracting IHT are for weddings and birthdays. Each tax year, you can give a tax-free gift to someone who is getting married or starting a civil partnership. You can give up to £5,000 to a child, £2,500 to a grandchild or great-grandchild, or £1,000 to any other person. The rules for birthday gifts are the same as for Christmas.
If you have any queries about your allowances and making gifts, even possibly regular gifts out of income, you should speak with your Solicitor to understand the options available to you. You should also consider whether the gifts you make in your lifetime will have any impact of what provisions you have made in your Will, or whether your Will needs updating to balance out the gifts you have already made.
Our Wills and Estate Planning team at Giles Wilson would be happy to meet you and discuss your Estate and gifting plans, to help you make tax-efficient gifts and utilise your allowances … especially at this time for giving!
Wishing all of our clients a lovely Christmas, from all the team at Giles Wilson.
