Gifting funds

Posted by: Duncan Orr ">Duncan Orr, on August 15, 2017.

3 things to remember if you’re planning on gifting funds

You may be familiar with the expression “it’s better to gift with a warm hand than a cold hand” i.e. make gifts during your lifetime and gifting can form an essential part of Inheritance Tax planning.

We’ve identified 3 key points with gifting that many seem unaware of;

1.Take advantage of gifts that are always exempt from Inheritance Tax – Every individual has an annual gifting allowance of £3,000, if you don’t use it in full you can “carry over” the remainder and use it in the following year. Wedding gifts of up to £5,000 for your child, up to £2,500 for a grandchild, up to £2,500 as a gift to your spouse or civil-partner-to-be or up to £1,000 to anyone else are also exempt.

You can also make small gifts (up to £250) to as many different people as you like, but you cannot use your annual exemption and your small gift exemption on the same person in the same year.

2.Gifts made from excess income can be immediately exempt if:

a. The gift was part of normal expenditure
b. Taking one year with another it was made from income
c. After the gift the donor was left with sufficient income to maintain their usual standard of living.

3. Inheritance Tax payable on gifts (Taper Relief) – Taper relief is an inheritance tax (IHT) relief that offers a gradual reduction in the amount of IHT due on gifts made within 7 years of death. A common misunderstanding is that taper relief achieves its tax saving by reducing the transfer of value. This is not the case – the value of the gift never changes, only the tax due.

Crucially, this relief only applies when cumulative gifts, in the 7 years before your death, exceed the personal IHT allowance (£325,000), it will not apply to smaller “one off” gifts.


If you have a question about gifting funds, we at Swindells Financial Planning are always pleased to help. You can call us on 01825 76 33 66 or complete a contact form.



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