Lifetime Gifting: What you need to know

If you make financial gifts within the seven years prior to your death, there could be inheritance tax (IHT) to pay on those gifts.

Each person has an annual allowance of £3,000, and you can carry over your unused allowance for one year. The “year” is the tax year, running 6 April to 5 April.

If you survive for seven years after making the gift, there is no inheritance tax to pay – unless it is a gift where you reserve some sort of benefit as then the gift is not considered to be have been fully given; this would be a situation such as gifting your home to your children but continuing to live there rent free.

You can make small gifts of up to £250 each year as many times as you like, provided you have not used another allowance on that person. For example, you could gift £3,000 to your child and £250 to your grandchild, but could not give an additional £250 to your child as you have already used your annual £3,000 allowance on their gift.

There is also an allowance for gifts in consideration of marriage as well. For your children this allowance is £5,000, for your grandchildren it is £2,500, and for anyone else it is £1,000. Unlike the small gifts as detailed above, you can use your £3,000 annual allowance on the same person you have given a gift in consideration of marriage to.

You may make payments from your regular income to someone, provided you can afford it after your own living expenses, without limit. This could be to provide financial support to a family member or to pay into a savings account for a child under 18. You can use any of the other allowances alongside these gifts.

If you would like any further information on lifetime gifts or how the inheritance tax is calculated, please contact a member of our Private Client team at privateclient@gilsongray.co.uk.