It’s easy to think that you can give financial gifts to friends or family at any time, without falling foul of the UK’s tax laws. While that’s true in many cases, there are some circumstances where you need to be careful.
This is especially the case as you get older, because any gifts you give your family could still be liable for inheritance tax.
The Motley Fool recently put together a guide about financial gifting in the UK to help people avoid some of the most common pitfalls.
It explained that any gifts to your spouse, civil partner or a UK-registered charity are not subject to tax. You also have a £3,000 annual exemption on other financial gifts, and this can be rolled over into the following tax year if it’s not used.
Wedding gifts and small cash gifts of up to £250 are also tax-free in the UK. One thing to watch though is that any gift given within seven years of your death could be liable for inheritance tax. This will only apply if their total value is over the £325,000 threshold.
It’s worth noting that a lower rate of inheritance tax is charged on gifts made more than three years before your death, but still within the seven years. Rather than the 40 per cent rate, inheritance tax is reduced by 20 per cent for every additional year between when a gift was made and the death of the person in question.
This can all get very complicated, which is why it’s advisable to get bloodline planning advice. Last month, the Independent highlighted the importance of having your affairs in order so that your loved ones receive any money you leave behind. According to the newspaper’s research, up to £15 billion could be sitting unclaimed in the accounts of people who have died because their family simply doesn’t know which accounts they had.
