Happy Christmas to you all!!
Did you realise that you could use this time of year to make gifts which will reduce your liability to Inheritance Tax? We thought we’d prepare a little guide about what you can give away whilst still keeping the taxman happy…
A lot of people don’t realise that Inheritance Tax may have to be paid on their estate when they pass away. This can be 40% of everything over the tax-free threshold (currently set at £325,000). Given that the average price of a property in Hertfordshire is over £500,000 it’s easy to exceed those limits!
However there’s a simple way to reduce this liability, and help your family have an extra special Christmas at the same time.
- Did you realise that you can give away £3,000 worth of gifts to your family and friends each tax year – this amount is immediately removed from the value of your estate?
- You can also give as many small gifts of up to £250 to as many people as you want (as long as they haven’t also received part or all of the £3,000 mentioned above).
- Additionally you can give gifts out of your income. For example, Christmas and Birthday presents – but you must be able to maintain your standard of living after making the gifts.
- If any of your family or friends are getting married soon, don’t forget you can give a cash gift which immediately reduces the value of your estate for Inheritance Tax purposes. You can give your child up to £5,000, your grandchild up to £2,500 and you can gift anyone else who is getting married up to £1,000.
- There are certain people and organisations you can make unlimited gifts to without paying Inheritance Tax. These include:
- Your husband, wife or civil partner provided they live in the UK.
- Charities registered in the UK.
- Some national organisations like universities, museums and the National Trust.
Please note that new rules and thresholds regarding passing your property to your children were introduced in April 2016. If you would like more information regarding gifts or Inheritance Tax thresholds then visit www.gov.uk.
We hope that’s given you some food for thought…
If you can’t spend it yourself, the next best thing to do is to give away what you can to reduce the likely Inheritance tax bill on your estate. Why don’t you use this Christmas to help your family, friends and your favourite charities and reduce your Inheritance Tax liability at the same time?
You can of course make bigger gifts but then you have to live a certain period before the gift is treated as not belonging to you in it’s entirety (commonly known as the 7 year rule).
At A R K we specialise in offering free advice on anything related to Wills, Lasting Powers of Attorney, Funeral Plans and Probate. Do ring us on 01438 746977 or email us at firstname.lastname@example.org for more information.