Call to scrap Inheritance Tax and replace with a gift tax
All you need to know about giving tax efficiently this Christmas
‘Tis the season to be jolly and for many, that includes giving money / gifts to friends, family and loved ones at Christmas and, without sounding too Bah Humbug, it is important to remember about the Inheritance Tax (IHT) rules on giving and here is a brief reminder of what you can give away this Christmas without any adverse IHT consequences to your estate:-
- Small gift exemption – give up to £250 to anyone, regardless of whether they are related to you.
- Annual exemption – everyone has an annual exemption of £3,000 which they can give away each tax year. Any unused annual exemption from the previous tax year can be used as well. This cannot be given to the same people as the Small Gifts exemption.
- Charities – charities are exempt from IHT so there are no limits on what you are able to give to charity.
- Spouse exemption – spouses are exempt from IHT so you can give away as much (or as little!) to your spouse without any adverse IHT consequences.
- Regular gifts of surplus income – review your income and give away any surplus that you would have converted into capital.
In addition to the gifting allowances, here is a brief reminder of changes that came into effect at the beginning of the financial year:-
- Increase in income tax threshold from £11,500 to £11,850
- ISA limit remains at £20,000 per year
- Junior ISA limit increases from £4,128 to £4,260
- Dividend allowance reduces from £5,000 to £2,000
- Annual gift allowance of £3,000 resets so take steps to give this away (and last year’s allowance, if unused)
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