Gifting

You can give small cash gifts up to the value of £250 to as many people as you want, as long as they are not the same people who have received a gift of your whole £3,000 annual exemption.

Outside these general provisions, if you live more than 7 years from when you make a gift (such as a deposit for a house), your recipient won’t have to pay inheritance tax when you die. If you don’t live for more than 7 years after making the gift, the recipient will be liable for inheritance tax as your gift will then count as part of your estate. The amount of inheritance tax owed reduces over time up to the 7 year cut off.

There are also certain circumstances where you can gift above your annual exemption without incurring inheritance tax:

1. Wedding gifts: Tax free money can be given in the form of a wedding gift in certain circumstances, for example, if it is given to a child and is worth £5,000 or less; given to a grandchild or great-grandchild and is worth £2,500 or less; or given to another relative or friend and is worth £1,000 or less.
2. Money to help with living costs: If you are helping an ex-spouse pay living costs, an elderly dependent or a child under 18 or in full-time education, this money will be exempt from inheritance tax. The 7 year rule applies.
3. Money from a surplus income: If you earn enough income to maintain your normal standard of living, you can make gift payments from your remaining income. For example, paying regular amounts into a child’s savings account. Again, the 7 year rule still applies.
4. Keep records of when money if gifted and to whom. This will be important once you die so the executors of your Estate can have transparency on when gifts were made and for the tax situation to be properly assessed.