The gifts that keep on giving?
Dec 4, 2023
It was a fairly hot topic in recent months, as anticipation of change heightened. But inheritance tax didn’t get the treatment some believed it deserved in last week’s Autumn Statement.
Talk of a rate-cut and even abolition of the tax came to nothing, as the Chancellor made his moves elsewhere. And so the status quo is uninterrupted; inheritance tax continues to be a major consideration in estate planning, and people and families will need to consider the impact the tax could have on their financial future.
As a team that helps clients get a good picture of their likely tax liability, we know that there is often a degree of anxiety around the potential impact of tax on the value of their estate, and their loved ones’ liabilities. A common concern among clients is that they are coming to this too late; that they ought to have started their inheritance tax planning sooner. But, while early planning can be an advantage, good planning later on can still bring significant benefits.
You’ll need to establish whether or not your estate is likely to hit the inheritance tax threshold of £325,000. Only value over that amount stands to be chargeable, and so if the combined value of things you own (your home, money and other possessions, etc) falls below that, inheritance tax won’t be payable. Where inheritance tax is likely to be payable, that liability can be reduced (or sometimes eliminated) in a number of different ways. One of these is by making gifts.
Gifts to a spouse or civil partner who lives permanently in the UK won’t attract inheritance tax. Beyond that, a person can make gifts of up to £3,000 per year which won’t count for inheritance tax purposes, and gifts of up to £250 to people not already covered by a tax-free allowance. It’s also possible to make tax-free gifts of larger values, but the person making them must live for at least seven years afterwards if inheritance tax is to be avoided (these are known as ‘potentially exempt transfers’ or ‘PETs’).
Gifts can be a good way of someone reducing their estate’s value during their lifetime, either so that the £325,000 inheritance tax threshold isn’t reached or that there’s less estate value chargeable to inheritance tax. They are just one part of financial planning that can be put in place quickly and, with good advice and a strategic approach, can lead to better outcomes for families.
To talk to us about making gifts, or any other aspect of inheritance tax planning, contact us on email@example.com or call on 01264 353411.
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