At this season of goodwill it is worthwhile also considering some tax planning. Why not surprise the family with a slightly more substantial gift this Christmas to assist with whittling away against your Inheritance Tax liability?
In general, an individual has an Inheritance Tax-free sum which they can dispose of on their death of £325,000 and for married couples this totals £650,000. Inheritance Tax is charged on your death not only on the value of your estate but on the value of any gifts made in the previous 7 years unless they are exempt. So why not make some exempt gifts?
An individual can give away £3,000 tax-free each tax year. In addition, an individual can give away any number of gifts of £250 to persons who have not received any part of the £3,000. Why not broaden the smile on your grandchildren’s faces by giving them £250 each this year?
Finally, a less well known exemption is when you make gifts out of your surplus income. Regular giving to family out of your surplus income will also be exempt. This applies even if the sums are quite high as long as it can be shown that you are giving away surplus income and not dipping into your capital.
All in all this may well be food for thought. There is no substitute for getting professional advice on the subject (and this update is only a taster – it is always hard to keep the subject of food away from Christmas-related matters!) but why not give it some thought?
If you would like further information, please contact our wills and probate team on 033 3344 9600 or complete our contact form.