The starting point is that each individual can, of course, gift any amount they wish. However, there are several things that should be considered before doing so:
General principles
Each individual has a gifting allowance to non-exempt recipients of £3,000 per tax year. The unused amount from a previous year can also be “rolled over” but to not more than £6,000.
Gifts of any amount to charity/s and/or spouses (as long as the spouse is a UK resident) are free of any tax implications.
You can gifts up to £250 to as many people as you wish.
You can also make the following gifts at the time of a wedding
£5,000 to a child
£2,500 to a grandchild or great grandchild
£1,000 to anyone
You could even make gifts each year for the rest of your life, as long as they remain within these amounts, and there would be no IHT implications.
Timeframes
Should you make gifts totalling more than £3,000 in any tax year, you have to survive seven years after the date the gift was made. Whilst you cannot plan the date of your death, making any gifts over £3,000 should be timely and ideally made whilst you are well and healthy.
If you do pass away within seven years of making a gift and you have made gift/s of more than your individual tax threshold (currently £325,000), then it is possible for your Executors to apply for Taper Relief to be deducted. This can reduce the IHT payable from 40% right down to 8% (see table below). It is important to note however that Taper Relief is only available where the gifting is over the threshold and will not apply (currently) to gifts totalling less than £325,000.
IHT taper rates for gifts
Time since the gift
IHT rate
6-7 years
8%
5-6 years
16%
4-5 years
24%
3-4 years
32%
less than 3 years
40%
Gifts out of Income
If you can show gifts were funded out of surplus income, not savings, it is possible that your Estate will not pay IHT. It is a complicated matter to prove, and you need to make a written declaration confirming the gifts are paid for out of income, not from savings or investments.
The information in this guide is for general guidance and is not legal advice. If you wish to discuss gifting in more detail, please contact a member of our Private Client Departmen