Using Lifetime Inheritance Tax Exemptions
Inheritance Tax (‘IHT’) is charged on the amount of your estate that exceeds the threshold at the date of death – the current threshold is £325,000 for the tax year 2013/14. IHT is also charged on certain lifetime transfers.
For this reason it is important to have your Wills and financial affairs in order and up to date as this can help to minimise the IHT your beneficiaries would otherwise have to pay in the event of your death.
It is easy to think about taking some small steps for IHT planning. It is also important to act now to use a valuable annual allowance which is available to every individual. You can make a gift of up to £3,000 per tax year (between any number of recipients) – you should make use of this before the end of this tax year (5 April 2014). Also remember that if you did not use your allowance for the 2012/13 tax year this can be carried forward for one tax year only. So please use it or lose it!
There are also a number of other ways to use lifetime gifting which are immediately exempt from any IHT charge. These valuable exemptions can really help to make a difference.
Gifts and transfers which you can think about making are:
1. Transfers to exempt beneficiaries including your spouse (subject to certain domicile rules), qualifying charities, some national institutions and UK political parties;
2. Wedding gifts – gifts of up to £5,000 from each parent, up to £2,500 from each grandparent and up to £1,000 from anyone else;
3. Small gifts of up to £250 – this can be to any number of individuals;
4. Regular gifts out of normal expenditure/income.
This briefing has been produced for information purposes only and is based on the law and other information available at the time of writing. We cannot be held responsible for any losses incurred through acting or failing to act on the basis of anything contained in this Briefing.
If you require advice on any of the matters referred to, please contact us so that we can advise you taking into account your own particular circumstances and requirements.