There is an annual Inheritance Tax exemption of £3,000 for gifts. This exemption can also be carried forward to the following tax year if not used to make a maximum gift of £6,000. You can also give unlimited individual gifts of up to £250 per person during the tax year, but only if you haven’t used another exemption on the same person. There are additional, special allowances for gifts made at a wedding or civil ceremony.
Use the following relief to exempt regular financial support to your family
It is also possible for wealthier taxpayers to make tax exempt gifts and payments that are paid as normal expenditure out of income. This is a very flexible exemption from IHT as there are no specific requirements such as having to make fixed regular gifts to the same person. With proper planning this can be a very useful tool. For example, to enable grandparents to help pay school fees for their grandchildren.
However, careful consideration has to be given to ensure that these payments form part of the transferor’s normal expenditure and is made out of income and not out of capital. The person gifting the money must ensure that they are left with enough money to maintain their normal standard of living out of their regular income after making the gift.
If you are unsure if your family arrangements are covered by this relief from IHT, please call for further advice.