A time for giving?
A time for giving? We are all aware of the effect that the Coronavirus pandemic has had on the country’s economy and many of the population’s personal financial stability. You may have family members or friends who have been affected and want to do all you can to help them. If you find yourself in the fortunate position of being able to provide financial support to your loved ones, and your estate is likely to be subject to IHT on your death, Wansbroughs are here to ensure that you do so in the most tax efficient way.
1. Gifts from excess income If you have an income in excess of what is needed to maintain your usual standard of living, you can make gifts from your surplus income. You will need to keep detailed records of the gifts that you make each year, so that after your death, your executors can submit these records to HMRC and claim that no IHT is payable in relation to the gifts. We can provide assistance with ensuring that your records will meet HMRC’s requirements.
2. Annual gift allowance Every individual is able to make gifts of up to £3,000 per tax year without any IHT implications. Any unused allowance can be carried forward to the next tax year (for a maximum of one year), so if you made no gifts in the 2019/2020 tax year, you can now make a gift of £6,000 without an IHT liability arising. As a couple, that could mean making a gift now of £12,000.
In addition, you can make as many small gifts (up to £250) free of IHT each year as you please. You cannot however combine the two allowances.
3. Trust funds Putting your assets into a trust provides a way to gift your assets, whilst potentially retaining some control over them. This can be particularly useful if you wish to make a gift to a minor for a specific purpose, e.g. funding education.
4. Wedding bells While Covid-19 may have stopped a number of weddings from taking place this year, as and when those postponed nuptials do take place, you can help make the event even more of a celebration by making a gift to the happy couple. Any such gift would be IHT free subject to the following limits: • £5,000 to a child; • £2,500 to a grandchild (or great-grandchild); and • £1,000 to anybody else.
5. Gifting an asset It is not just Inheritance Tax that needs to be considered when making gifts. In our recent article (A possible silver lining when assets drop in value?, 9 April 2020), we explained how a drop in the value of assets may offer an opportunity to gift assets with minimal Capital Gains Tax implications.
To find out more, please get in touch with your usual Wansbroughs contact or email the Private Client team at firstname.lastname@example.org.
The contents of this article was written by Wansbroughs Solicitors in June 2020 and intended for general information purposes only and shall not be deemed to be, or constitute legal advice. This article was posted with the permission of Wansbroughs Solicitors whose views are independent of Keith Montgomery Associates Ltd.