HMRC data reveals a notable increase in IHT receipts, rising to £4.3bn between April and September 2024 – a £400m jump compared to the same period in 2023. It therefore makes sense to understand the key gifting allowances as we approach the end of the tax year.
Gifting allowances and exemptions
You can gift up to £3,000 in each tax year. These gifts will be exempt from IHT on your death, even if you die within the seven-year period that otherwise applies to lifetime gifts. You can carry forward any unused part of the £3,000 exemption to the following year but if you don’t use it in that year, the exemption will expire.
There are also other gifts that don’t count against this annual exemption and are free from IHT, including:
- Wedding gifts: Up to £5,000 for a child, £2,500 for a grandchild (or great-grandchild), and £1,000 for anyone else
- Small gifts: Individual gifts of up to £250 per recipient per year
- Gifts from regular income: Christmas, birthday, or other gifts made from income that is regularly received, which can also be exempt from IHT.
While these allowances may seem modest, they are an effective way to gradually reduce the value of your estate, provided you don’t compromise your own financial security. We can help you strike the right balance.
A settled pattern of gifts from surplus income can also be made. Conditions apply, and advice would be needed to ensure that the gifts are made and evidenced in the right way.
It is important to take professional advice before making any decision relating to your personal finances. Information within this article is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK.