I first met Keri when my late husband sold his company shares and we turned to Broadway Financial Planning for investment advice. Keri quickly impressed us with her vast knowledge and understanding of the financial marketplace and global economies.
Many of our clients already make regular gifts to family, friends or charities in order to either fulfil their philanthropic goals or aim to reduce their taxable estate on death.
The discussion over making gifts regularly forms part of our annual discussions and we have highlighted some of the key areas below:-
I can only gift £3,000 per annum….right?
Not necessarily. You can make gifts of up to £3,000 in any one tax year without giving rise to any Inheritance Tax liability irrespective of how long you live after making the gift. In addition, if you have not made a gift in the previous tax year, you can also use that allowance too, making a total of £6,000.
You can also make “small gifts” of £250 irrespective of the number of recipients. However, this exemption cannot be used as a way of making a larger gift to one individual……even if you make multiple payments!
Gifts can also be made towards a wedding or civil ceremony, depending on who’s making it. Parents can make exempt gifts of £5,000, grandparents of £2,500 and all other individuals of £1,000. But beware, in order to satisfy the rules, these gifts must be made on or before the special day.
It doesn’t matter if I don’t record gifts made as no-one will find out!
In theory, this approach may be correct due to the lack of resources within HMRC. However, it is the responsibility of your executors to confirm that the estate accounts submitted are correct and that nothing has been omitted. If you do not keep careful and accurate records of any gifts made, it will be very difficult for your executors to fulfil their responsibilities. In our opinion, it is better to be clear and concise on this matter. If you would like our help with how to record any gifts that you are making, please get in touch.
I can make additional gifts if I have spare “income”
Yes, subject to certain caveats. Any gifts made out of income must not affect your standard of living. Therefore, if you spend £5,000 per annum on holidays, it is not appropriate to stop going on holiday in order to make additional gifts to your children.
Be aware of where your “income” is coming from. It is very typical for those with investments, to receive regular withdrawals from their portfolios or investment bonds. If your “income” is made up of capital such as a 5% withdrawal from an investment bond, this will not satisfy the rules for this exemption.
If you would like further advice on any of the issues raised here, please get in touch.