Whilst I have completed most of my Christmas shopping by now (without wishing to brag), it wasn’t all that straightforward. Trying to find out what people want without being too obvious, making sure you haven’t bought the same thing as someone else, and then when you do finally find the right thing, keeping it hidden until it’s wrapped and under the tree!
Now if the thought of all that makes Christmas just a bit too stressful, and like me you’re just looking forward to spending time with family and some (modest) overindulgence, then perhaps a monetary gift may be on your radar.
The odd few pounds in a Christmas card isn’t going to ring alarm bells at HM Revenue and Customs (HMRC), but what if you’re feeling particularly generous? ‘Tis the season’ after all.
Under HMRC rules there are a number of different gifts each year that are considered exempt for Inheritance Tax purposes.
The Annual gift exemption, for example, allows you to gift up to £3,000 each tax year. If you haven’t used it in the previous year, that can be carried forward too. In theory, a couple who have not used their exemptions in the current or previous year could gift £12,000 between them.
Beyond this you have the small gift exemption whereby gifts of up to £250 can be made to any number of people in the same tax year. This must be an outright gift and cannot be used in conjunction with the larger annual gift exemption.
If it’s wedding bells you’re hearing rather than Christmas carols, each parent can give £5,000 as a gift in consideration of marriage or civil partnership (such gifts are usually made before the marriage or civil partnership takes place). Each Grandparent can give £2,500 and any other person can give £1,000.
Beyond this, gifts out of normal expenditure can also be considered. These must form a part of the normal pattern of outgoings, be made from income and the donor (the person making the gift) must be able to maintain their normal standard of living.
There are a number of options available when considering gifting, so don’t fret if you’re struggling to think of what to buy someone this festive period.
If you’d like to know more regarding effective ways of gifting, or want to review your current estate planning strategies, please do get in touch
for a free initial discussion or to arrange a meeting (mince pies may be included).