April 1st, 2022
by Beach Accountants
We wanted to remind our readers of the Inheritance Tax (IHT) rules for tax-free gifts. You can give away up to £3,000 worth of gifts each tax year. This is known as your annual exemption. Any unused part of the annual exemption can be carried forward, but only for one year. So, if you didn’t make any cash gifts in 2021-22, you could gift up to £6,000 before the end of this tax year (2022-23).
There are also generous exemptions for normal gifts made out of your income, but you must be able to maintain your standard of living after making the gift. There are also reliefs available for wedding or civil ceremony gifts. You can gift up to £1,000 per person with higher limits of £2,500 for a grandchild or great-grandchild and £5,000 for a child.
You can also give as many small gifts of up to £250 per person as you want during the tax year but only if you haven’t used another exemption on the same person. There is no IHT to pay on lifetime gifts between you and your spouse or civil partner as long as you both live permanently in the UK.
Other gifts, outside these limits, count towards the value of your estate and should be carefully considered.