Gifting Allowances

There are a number of categories of gift that you can make without having to pay Inheritance Tax (IHT). 

Spousal Exemption. You can give your spouse (or civil partner) assets with no upper limit and there will be no tax to pay provided their permanent home is in the UK.

Annual Allowance. You can give £3,000 in any tax year to whomsoever you wish and there will be no tax to pay. The amount is the total for the year irrespective of the number of gifts made. If you haven’t made a gift in the previous tax year you can use that allowance as well.

Small Gifts. You can give up to £250 to any number of people and there will be no tax to pay.

Regular gifts out of income. This is often overlooked and can be very useful although it will only be verified at the point of claim which is after a death has occurred. You are allowed to make regular gifts with no upper limit, provided that the money is paid out from surplus income rather than capital and they are deemed to be normal expenditure. You may wish to discuss these with one of our specially trained advisers. This can also include maintenance payments to former spouses.

Business Relief. You may be able to pass on a family business during your lifetime or after your death and benefit from tax relief at either 50% or 100%. Careful planning is essential and you should consider talking to one of our corporate advisers as to how best to arrange your business affairs.

Wedding gifts. You can give certain amounts when someone gets married or enters into a civil partnership. The amounts vary according to the relationship you have with them.
Parents can give £5,000
Grandparents or remoter relatives can give £2,500
Non relatives can give £1,000.

Charities. You can leave any amount to a UK registered charity and there will be no tax to pay. Also included are certain organisations governed by Royal Charter such as the Boy Scouts and St John Ambulance.

Agricultural & Woodland Relief. These may be available and you should consult one of our advisers for further details.

National Institutions. You can leave any amount to certain UK institutions such as the National Trust, museums, or universities and there will be no tax to pay.

Political Parties. You can leave any amount to them, or perhaps your favourite Duck House and there will be no tax to pay.

There is also another category of gift which may qualify for full or partial relief depending on when the person dies. This is called the Potentially Exempt Transfer or P.E.T., often known as the 7 year rule. In essence, you can give any amount away to anyone you wish and, provided you live for a further 7 years, there will be no tax to pay.

If you die within 7 years of making the gift, the amounts of any gifts will be added back into the estate. If the total estate is less than the threshold then no tax is due. If the amount of the gifts were less than the threshold but the estate exceeds it when the gifts are added back in, then inheritance tax (IHT) is due and is paid by the estate. If the total gifts exceed the threshold then tax is due and payable by the beneficiaries of the gifts.

If you make a potentially exempt transfer and survive at least 3 years then you may be eligible for something called taper relief. This only happens if the gifts made take the estate above the nil rate band of £325,000 (2009/10) when added back into the estate.To find out further details of this somewhat complicated system you may like to talk to one of our advisers.

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