No inheritance tax: regular gifts into savings account?

Mocas

Is this new? There's no Inheritance Tax on gifts made as "regular payments into a savings account"?

From HMRC:
"There’s no Inheritance Tax on gifts from the deceased’s income (after they paid tax) as long as the deceased had enough money to maintain their normal lifestyle. The gifts include:

• Christmas, birthday and wedding or civil partnership anniversary presents
• life insurance policy premiums
• regular payments into a savings account

Am I understanding this correctly: in addition to the £3000 annual exemption, a person could gift ANY amount to their loved ones as long as it's made a regular payment into a savings account, and as long as the person can maintain their normal lifestyle?

I can't find any reference to this in MoneySavingExpert's inheritance tax page and a quick web search doesn't bring up anything obvious, yet this seems like such a big way to reduce inheritance tax, I wonder if I've misunderstood.

le_loup

Mocas wrote: »

"There’s no Inheritance Tax on gifts from the deceased’s income (after they paid tax) as long as the deceased had enough money to maintain their normal lifestyle.

Not from the deceased's wealth.

kidmugsy

When you have died, your executors will have to demonstrate that the payments were indeed regular and out of surplus income. So you have to keep good records and ensure that nobody throws them out after your death.

Linton

Mocas wrote: »

Is this new? There's no Inheritance Tax on gifts made as "regular payments into a savings account"?

From HMRC:
"There’s no Inheritance Tax on gifts from the deceased’s income (after they paid tax) as long as the deceased had enough money to maintain their normal lifestyle. The gifts include:

• Christmas, birthday and wedding or civil partnership anniversary presents
• life insurance policy premiums
• regular payments into a savings account

Am I understanding this correctly: in addition to the £3000 annual exemption, a person could gift ANY amount to their loved ones as long as it's made a regular payment into a savings account, and as long as the person can maintain their normal lifestyle?

I can't find any reference to this in MoneySavingExpert's inheritance tax page and a quick web search doesn't bring up anything obvious, yet this seems like such a big way to reduce inheritance tax, I wonder if I've misunderstood.

It is a useful way around inheritance tax if you have a very high income in retirement. But you must be able to prove that it came from income without any reduction in savings or other assets. Its no good for example living off your savings and simply paying your pension out as a gift.

If you do make gifts from income it would be prudent to keep detailed income, spending, and savings account records so that your executors could satisfy HMRC should they raise any queries.

Mocas

Thanks a bunch. I had missed the significance on it coming from "income".

mgdavid

Linton wrote: »

It is a useful way around inheritance tax if you have a very high income in retirement. But you must be able to prove that it came from income without any reduction in savings or other assets. Its no good for example living off your savings and simply paying your pension out as a gift.

If you do make gifts from income it would be prudent to keep detailed income, spending, and savings account records so that your executors could satisfy HMRC should they raise any queries.

Would drawdown count as income? (along with SP, DB P and annuities of course)

Linton

mgdavid wrote: »

Would drawdown count as income? (along with SP, DB P and annuities of course)

The contents of a drawdown pot isnt subject to IHT anyway. So there is no tax advantage in drawing down, paying income tax, and giving the money away. The downside would be that you could ensure that IHT is due when it wouldnt be had you not made the drawdown gift. As far as I know there isnt any guidance on the implications.