Inheritance Tax: Understanding Gifts and Exempt Transfers
Keywords – Exempt Transfers
Gift giving has value beyond sentiment.
Giving monetary gifts to loved ones is a fabulous way of reducing your Inheritance Tax. But, you need to consider the following points.
Potential Capital Gains Tax
Generally speaking, as long as you live more than seven years after you make this gift, the recipient will not be charged Inheritance Tax.
A lot of gift-givers are not aware that non-cash presents, like shares and property, could result in either you or the recipient of the gift, having to pay Capital Gains Tax.
When you first make this gift, the official name of the asset is — ‘Potentially Exempt Transfer‘. Then if the gift-giver sadly passes away within seven years of making the ‘Potentially Exempt Transfer’ it’s then referred to as a ‘Chargeable Transfer’.
So, if you are considering gifting assets or money, take meticulous records of all the following. This will go a long way in helping the executor of your will navigate their way through Inheritance Tax:
- What money and/or assets you gave away
- The full name of the person you made the gift to
- The date you made the gift
- If you gave away an asset, its value
Interestingly, if you are married or have a civil partner, you can leave the entirety of your estate to your spouse tax-free. Unfortunately, the same is not necessarily true of unmarried partners.
You should note: You can give away a gift (to anyone) worth less than £250, tax-free. You can make as many of these gifts as you want without worrying about the tax implications!
Estate and tax planning are somewhat complicated.
So, it’s worth seeking professional advice.
That way, you can be confident of any, and all the ramifications that gift giving might have on the state of your inheritance tax. For any help, please get in touch with us today.