Inheritance Tax - gift allowance v gift from income

kidmugsy

The exempt £3k is available to anyone; treat it as coming from capital. The exemption for the surplus income gifts has to be justified retrospectively by demonstrating that the deceased did indeed have surplus income for the relevant spell (a few years, say). You have to keep records so that your executor will be able to do so.

I don't suppose it matters whether the money is handed over monthly, quarterly or annually but you'd be wise to write your daughter a letter so that she can show it to HMRC in case they ever query whether the regular payment she's receiving is income.

When we had enough income to make such gifts we justified the practice in notes to ourselves by using the "taking one year with another" provision to cover lumpy expenditures, effectively "writing them off" over a few years. And then when our surplus income had dwindled away we simply stopped the gifting. Of course, if we live long enough there won't be any need to justify the gifts as tax-exempt because the seven year survival period will have occurred.