Retirement is an opportune time to take stock of your assets and
to think about gifting to save your estate inheritance tax
Perhaps your children have now flown the nest and you have
downsized and are looking at ways of benefitting the next
The most straightforward IHT exemption is the 'annual
exemption' where you can make gifts of £3,000 every
financial year without any IHT repercussions, and bring forward any
unused exemptions from the previous financial year. Another way to
look at this is a married couple can gift £12,000 IHT-free
every two years.
But there are other exemptions to help you plan for the future.
If a person has surplus income then it can be gifted away IHT-free
no matter what the amount is, but there are criteria that need to
The gift must be made as part of income and not capital. The
person making the gift will need to demonstrate that there is still
enough income left to maintain a normal standard of living, after
all expenditure is taken into account. There must also be a regular
pattern of gifting, such as annual school fees for a
Gifts made in contemplation of marriage or civil partnership are
exempt at £5,000 from parents, £2,500 from grandparents
and £1,000 from others.
Small gits of £250 or less, limited to one cash gift per
person, in any one tax year are IHT-free.
Gifts to charity are completely IHT-free and there is also no
charge on transfers between spouses.
Higher value gifts are also IHT-free provided that the donor of
the gift survives them by seven years. The value then falls out of
account. But if death occurs within seven years, the effect is to
reduce your IHT nil rate band on death (full value currently
£325,000) by the value of the gift. If the original gift was
greater than £325,000, taper relief can apply in certain
circumstances to minimise the tax burden.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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