Inheritance Tax Gifts

newatc

We wish to give our children an annual gift mounting to a total of £6k (using our 3k exemption).
As our children live thousands of miles away we tend to send them money gifts for their birthdays and xmas (usually less than £100 each). As the birthday/xmas gifts do not impact our standard of living then my reading of the Gov.uk rules suggest this will all be regarded as exempt.
Apart from reducing any IHT in a sanctioned way, I particularly want to be make the probate/IHT simple for my wife in the event of me leaving first.
Can anyone confirm my analysis?

getmore4less

Is the 2x£3k on top of the little ones?

newatc

Yes the Xmas and birthday money would be on top of the annual 3Ks gifts.

Keep_pedalling

Gifts from income can only be claimed if you can maintain your standard of living from income alone, so if you are dipping into savings to pay for things then you can’t claim you have excess income to give away. See the following thread for mor info.

https://forums.moneysavingexpert.com/discussion/5751038

Small gifts are not going to make a lot of difference in the IHT liability of your estates, so if your really want to address it you should be looking at making lager PET gifts (potentially exempt from tax) which will fall out of your estate after 7 years. If any of your children are to be married in the near future also make use of your gifts in contemplation of marriage allowance (a couple can make a joint gift of £10k for each child)

If you own your own home, don’t forget to include the primary residaence nil rate band can be added to your nil rate band so if you total estate is under £850k you don’t have any IHT to worry about, and providing one of you is still alive by May 6th 2020 that will have risen to £1M. If you you have more than that start making those larger PET gifts ASAP.

Linton

If you are going to make significant gifts from income make sure you keep detailed records of income, expenditue and gifts for your executor. It is a pain going through 7 years of someone else's bank accounts to identify gifts and prove they came from income. My father did keep detailed records and it was still a pain.

newatc

Linton wrote: »

If you are going to make significant gifts from income make sure you keep detailed records of income, expenditue and gifts for your executor. It is a pain going through 7 years of someone else's bank accounts to identify gifts and prove they came from income. My father did keep detailed records and it was still a pain.

Yes I started that spreadsheet earlier this year and I found it quite difficult going back over my quite detailed records for the last 7 years so definitely good advice.

newatc

Keep_pedalling wrote: »

Small gifts are not going to make a lot of difference in the IHT liability of your estate. .

This is true but as my post said I also want to keep the probate/iht as simple as possible for my wife so I don't want to just go over the exemption list for a small amount (if were giving larger amount for the purchase of property for example, that would be different). I expect the Xmas/birthday gifts would be ok but if I'm not sure I will reduce the larger gift (slightly) to make sure that the Xmas/birthday don't inadvertently take me over the limit. Certainly I don't find the HMRC guide clear on the issue.

Keep_pedalling

newatc wrote: »

This is true but as my post said I also want to keep the probate/iht as simple as possible for my wife so I don't want to just go over the exemption list for a small amount (if were giving larger amount for the purchase of property for example, that would be different). I expect the Xmas/birthday gifts would be ok but if I'm not sure I will reduce the larger gift (slightly) to make sure that the Xmas/birthday don't inadvertently take me over the limit. Certainly I don't find the HMRC guide clear on the issue.

Can you just confirm that these are just gifts from you? That is how you posts read, and if that is the case, you really epshould be looking at your wife’s allowances as well.

newatc

Keep_pedalling wrote: »

Can you just confirm that these are just gifts from you? That is how you posts read, and if that is the case, you really epshould be looking at your wife’s allowances as well.

I must have been taking communication lessons from the HMRC . I had meant it to be clear that we are talking about both our allowances amounting to 6k each year.

SuperHan

Are you leaving everything to your wife on your death?

If so, it'll be easy for your wife even if you have been making a few gifts above the limit in the past few years, as you won't have made more than £325k worth of gifts.

Depending on your combined wealth, the difficulty would instead arise on second death when the executors were trying to figure out how much of the £325k you used and how much you left to your wife.

I'd suggest sticking to what you're doing (£6k pa and regular gifts) and noting them on a spreadsheet. It's either IHTable or not, but someone can figure that out later and you certainly won't have made matters worse by making cash gifts while you're alive.

getmore4less

In the real world most people just ignore the small stuff because it is too much bother and no prudent executor will be trawling through 7 years of records looking at everything.

Once over the £250 and £3k exemptions how many are recording those smaller gifts, a meal out, a beer, coffee, buying the turkey for Xmas and having the family round...