Do you have a working knowledge of IHT rules?
If you are a generous grandparent and giving gifts of money to your family is a regular occurrence, it is important that you are aware of the current inheritance tax (IHT) rules.
Annual gift allowance
Within any tax year, you are allowed to gift up to £3,000 without running afoul of the annual exemption rule.
Potentially exempt transfers
If you gift larger amounts and live for more than seven years from the time of the said gift, it won’t be subject to inheritance tax when you die. This type of gift is known as a potentially exempt transfer (PET). It is always advisable to keep records of the amounts you gift and to whom, as you can be sure that the executor of your estate will appreciate your record-keeping.
Other exemptions to consider
Gifts under £250 are exempt, but not if the recipient has already benefitted from gifts that are included in your £3,000 annual gift allowance. Wedding gifts that are given before the wedding, which must take place, are also exempt depending on how the recipients are related to you and can range from £1,000 to £5,000.
If you are a generous giver, It is advisable to consult tax advisers and accountants Cheltenham, London, Kent or wherever you are located, as it certainly doesn’t pay to risk having your kind deeds turn into nightmares for your relatives after you die.
Don’t be among the 75 per cent of people who are ignorant of IHT risks
According to a recent HMRC report, just 25 per cent of the people studied who made financial gifts were aware of IHT risks. Taking Cheltenham as an example, the average price of a house according to Zoopla is £361,601. If you are single, this is already above your £325,000 IHT threshold; however, there is no need to panic. Exemption rules are complex and you are best advised to speak to a professional; for example, if you need an accountant in Cheltenham visit Randall and Payne.
The spirit of giving is a great thing; however, we wouldn’t want anybody to turn in their graves when the generous gifts they made to their families during their lifetime result in the taxman knocking at their door and demanding 40 per cent, especially when the said gifts have probably long been spent.