LEGAL EAGLE: Now is a good time to ‘wrap up’ an inheritance tax gift

Of course, some will only just be starting their Christmas shopping and be in a state of panic!

When making gifts of cash, the rules relating to gifts for inheritance tax (IHT) purposes must be remembered. Smaller cash gifts are covered by the Small Gifts Exemption, which allows as many gifts of under £250 to separate individuals to be made as you wish – they will all be exempt.

All taxpayers are eligible to take advantage of an IHT gift allowance of £3,000 per tax year, which will immediately fall out of their estate for IHT purposes. This is one sum which can be split between any number of recipients.

If you wish to make gifts over and above the annual allowance then you would need to survive the gifts by seven years for the value to fall outside of your estate and not reduce your individual tax free allowance (known as the nil rate band) which is available to your estate on your death.

An additional useful ‘gift’ can be the ability to give away an unlimited amount of income. The income however must be ‘excess income’. Excess income is income that you do not spend on yourself in any way. The ability to make gifts out of excess income can be a useful method of stopping your estate from increasing in value.

When making gifts of money it is important that you keep records. There is no formal place to record the gifts. It is just important that the gifts are known about and that, when you pass away, your executors have details of the gifts.

Finally, a gift to a registered charity is tax free.

If you are in any doubt about your ability to make financial gifts or need clarity about your tax liabilities then expert advice should always be taken.

Call Tilly Bailey and Irvine Law Firm on 01429 350062 to find the right solicitors in Teesside for you.