If you were to make a gift of money or assets would you be aware of the inheritance tax rules that might apply?
HM Revenue & Customs (HMRC) polled 2,090 people and found that only 25% of those who recently made a gift had a working knowledge of the rules. Less than half (45%) were aware of the rules or exemptions surrounding inheritance tax.
Inheritance tax will potentially apply on gifts where a donor dies within seven years of making the gift or on a chargeable lifetime transfer into a relevant trust or company.
Within these rules are exemptions, such as gifts to a spouse or civil partner, charity or a political party, while an annual exemption on gifts worth up to £3,000 applies.
Should the donor die within three years of making the gift, inheritance tax of 40% will apply if the estate is worth more than £325,000.
Gifts made between three and seven years before the donor’s death, are taxed on a sliding scale known as taper relief.
Among gifters who were aware of the rules, 18% said they were influenced by them when they made their largest gift.
Talk to a member of our Private Client Tax Team to understand the rules on gifts, or anything to with inheritance tax!