Is this allowable to gift to grandchildren (considering 7 year IHT exemption rule)?

Happytosave

Time is important so I need to be aware of the 7 year rule so want to keep gifts tax exempt. I have given £250 to my grandson on his birthday and at Christmas. I have also given £250 to my daughter (his Mum) and to my son in law on their birthdays and at Christmas too.  I want to give my grandson £3k in this financial year as one off gift. 
Is this allowable? 

[Deleted User]

Happytosave said:

Time is important so I need to be aware of the 7 year rule so want to keep gifts tax exempt. I have given £250 to my grandson on his birthday and at Christmas. I have also given £250 to my daughter (his Mum) and to my son in law on their birthdays and at Christmas too.  I want to give my grandson £3k in this financial year as one off gift. 
Is this allowable? 

See attached - there is no issue with what you propose. Note the lesser known ‘normal gifts out of income’ rule which is not universally known.
 https://www.gov.uk/inheritance-tax/gifts
May I ask?

The potential value of your estate?
Are you a widow(er)?
If there is no prospect of inheritance tax you can gift whenever, whatever as often as you wish. The only issue would centre on deprivation of assets should you require care in the future.

Keep_pedalling

There are no limits on how much you can gift, and anything you gift is exempt of tax. If your estate is in IHT territory, then anything gifted over your exemptions will be taxed from the remainder of your estate, but it will not add to the I.hit tax burden.

With the sums you are talking about it, all of it would be exempt anyway, as it appears you only used £1500 of last years allowance so you have £1500 to carry over into this year.

[Deleted User]

Keep_pedalling said:

There are no limits on how much you can gift, and anything you gift is exempt of tax. If your estate is in IHT territory, then anything gifted over your exemptions will be taxed from the remainder of your estate, but it will not add to the I.hit tax burden.

With the sums you are talking about it, all of it would be exempt anyway, as it appears you only used £1500 of last years allowance so you have £1500 to carry over into this year.

Would that not be £500 used? 

Each recipient received £500 and it would be possible for one of them to receive another £2500. Is that not correct?

‘You can give as many gifts of up to £250 per person as you want during the tax year as long as you have not used another exemption on the same person’

Happytosave

Keep_pedalling said:

There are no limits on how much you can gift, and anything you gift is exempt of tax. If your estate is in IHT territory, then anything gifted over your exemptions will be taxed from the remainder of your estate, but it will not add to the I.hit tax burden.

With the sums you are talking about it, all of it would be exempt anyway, as it appears you only used £1500 of last years allowance so you have £1500 to carry over into this year.

I want to actually gift the £3k in this financial year to my grandson. The £1500 (consisting of £250 sums)  I gave as various gifts was also in this financial year. So that is why I am asking if it will hit the IHT burden. I need to be aware of the 7 year rule at this time in life.

Keep_pedalling

Happytosave said:

Keep_pedalling said:

There are no limits on how much you can gift, and anything you gift is exempt of tax. If your estate is in IHT territory, then anything gifted over your exemptions will be taxed from the remainder of your estate, but it will not add to the I.hit tax burden.

With the sums you are talking about it, all of it would be exempt anyway, as it appears you only used £1500 of last years allowance so you have £1500 to carry over into this year.

I want to actually gift the £3k in this financial year to my grandson. The £1500 (consisting of £250 sums)  I gave as various gifts was also in this financial year. So that is why I am asking if it will hit the IHT burden. I need to be aware of the 7 year rule at this time in life.

Correct me if I am wrong, but last year you gifted £1500 in total, which means you have £1500 of unused allowance to carry over, so this year you have £4500 of exempt gifts which cover the Christmas and Birthday gifts and the £3000 gift you want to give to your GC. The 7 year rule therefore does not apply to any of these gifts. 

What approximately is your net worth? If it is below your nil rate bands then your estate will not pay IHT and the 7 year rule does not even need thinking about.

[Deleted User]

Happytosave said:

Keep_pedalling said:

There are no limits on how much you can gift, and anything you gift is exempt of tax. If your estate is in IHT territory, then anything gifted over your exemptions will be taxed from the remainder of your estate, but it will not add to the I.hit tax burden.

With the sums you are talking about it, all of it would be exempt anyway, as it appears you only used £1500 of last years allowance so you have £1500 to carry over into this year.

I want to actually gift the £3k in this financial year to my grandson. The £1500 (consisting of £250 sums)  I gave as various gifts was also in this financial year. So that is why I am asking if it will hit the IHT burden. I need to be aware of the 7 year rule at this time in life.

To utilise this year’s allowance youcan do that so long as you are not gifting him any other amounts. If you have already gifted him £500, you can only now gift an additional £2500.
However, as you have not used your allowance for last year you CAN gift him the full £3000.

But, again, you would only have to concern yourself with the seven year rule if your estate was to be of sufficient amount to attract inheritance tax.

Keep_pedalling

purdyoaten2 said:

Happytosave said:

Keep_pedalling said:

There are no limits on how much you can gift, and anything you gift is exempt of tax. If your estate is in IHT territory, then anything gifted over your exemptions will be taxed from the remainder of your estate, but it will not add to the I.hit tax burden.

With the sums you are talking about it, all of it would be exempt anyway, as it appears you only used £1500 of last years allowance so you have £1500 to carry over into this year.

I want to actually gift the £3k in this financial year to my grandson. The £1500 (consisting of £250 sums)  I gave as various gifts was also in this financial year. So that is why I am asking if it will hit the IHT burden. I need to be aware of the 7 year rule at this time in life.

You can do that so long as you are not gifting him any other amounts. But, again, you would only have to concern yourself with the seven year rule if your estate was to be of sufficient amount to attract inheritance tax.

No, the OP can gift as much as he likes. If the OPs estate is going  to be subject to  IHT he should be thinking of making larger gifts not sticking to the annual allowances. Failing to survive 7 years after gifting is tax neutral, so it is still worth doing even if there is a strong chance you won’t survive the 7 years, I would rather see my surplus wealth used in my lifetime rather than after I have died.

[Deleted User]

Keep_pedalling said:

Happytosave said:

Keep_pedalling said:

There are no limits on how much you can gift, and anything you gift is exempt of tax. If your estate is in IHT territory, then anything gifted over your exemptions will be taxed from the remainder of your estate, but it will not add to the I.hit tax burden.

With the sums you are talking about it, all of it would be exempt anyway, as it appears you only used £1500 of last years allowance so you have £1500 to carry over into this year.

I want to actually gift the £3k in this financial year to my grandson. The £1500 (consisting of £250 sums)  I gave as various gifts was also in this financial year. So that is why I am asking if it will hit the IHT burden. I need to be aware of the 7 year rule at this time in life.

Correct me if I am wrong, but last year you gifted £1500 in total, which means you have £1500 of unused allowance to carry over, so this year you have £4500 of exempt gifts which cover the Christmas and Birthday gifts and the £3000 gift you want to give to your GC. The 7 year rule therefore does not apply to any of these gifts. 

What approximately is your net worth? If it is below your nil rate bands then your estate will not pay IHT and the 7 year rule does not even need thinking about.

I am more than happy to be corrected but I don’t think that is correct. My understanding is that you can make as many gifts of £250 as you like. That is one exemption. If, however, you wish to avail of the £3000 exemption to a person , you must reduce that £3000 by any £250 gifts made to that person but only that person. I think my link explains that. 

Small gifts up to £250

You can give as many gifts of up to £250 per person as you want during the tax year as long as you have not used another exemption on the same person.

What else can I give tax-free?

Gifts that are worth less than £250

You can give as many gifts of up to £250 to as many individuals as you want. Although not to anyone who has already received a gift of your whole £3,000 annual exemption. None of these gifts are subject to Inheritance Tax.

So, in my view:

The op has given £500 to grandson, daughter and son in la in separate £250 amounts. That means that, if the wish is to utilise the £3000 allowance.

£2500 can be gifted to one of them

£1000 can be gifted to two of them

£500 can be gifted to all three.

Keep_pedalling

[Deleted User] said:

Keep_pedalling said:

Happytosave said:

Keep_pedalling said:

There are no limits on how much you can gift, and anything you gift is exempt of tax. If your estate is in IHT territory, then anything gifted over your exemptions will be taxed from the remainder of your estate, but it will not add to the I.hit tax burden.

With the sums you are talking about it, all of it would be exempt anyway, as it appears you only used £1500 of last years allowance so you have £1500 to carry over into this year.

I want to actually gift the £3k in this financial year to my grandson. The £1500 (consisting of £250 sums)  I gave as various gifts was also in this financial year. So that is why I am asking if it will hit the IHT burden. I need to be aware of the 7 year rule at this time in life.

Correct me if I am wrong, but last year you gifted £1500 in total, which means you have £1500 of unused allowance to carry over, so this year you have £4500 of exempt gifts which cover the Christmas and Birthday gifts and the £3000 gift you want to give to your GC. The 7 year rule therefore does not apply to any of these gifts. 

What approximately is your net worth? If it is below your nil rate bands then your estate will not pay IHT and the 7 year rule does not even need thinking about.

I am more than happy to be corrected but I don’t think that is correct. My understanding is that you can make as many gifts of £250 as you like. That is one exemption. If, however, you wish to avail of the £3000 exemption to a person , you must reduce that £3000 by any £250 gifts made to that person but only that person. I think my link explains that. 

Small gifts up to £250

You can give as many gifts of up to £250 per person as you want during the tax year as long as you have not used another exemption on the same person.

You can, but the OP has gifted 2 lots of £250 to each person so total gifts of £500 which is covered by the £3000 annual allowance rather than the £250 rule. It is possible that these gifts could fall under the gifts from excess income exemption, if the OP has any.

[Deleted User]

Keep_pedalling said:

purdyoaten2 said:

Keep_pedalling said:

Happytosave said:

Keep_pedalling said:

There are no limits on how much you can gift, and anything you gift is exempt of tax. If your estate is in IHT territory, then anything gifted over your exemptions will be taxed from the remainder of your estate, but it will not add to the I.hit tax burden.

With the sums you are talking about it, all of it would be exempt anyway, as it appears you only used £1500 of last years allowance so you have £1500 to carry over into this year.

I want to actually gift the £3k in this financial year to my grandson. The £1500 (consisting of £250 sums)  I gave as various gifts was also in this financial year. So that is why I am asking if it will hit the IHT burden. I need to be aware of the 7 year rule at this time in life.

Correct me if I am wrong, but last year you gifted £1500 in total, which means you have £1500 of unused allowance to carry over, so this year you have £4500 of exempt gifts which cover the Christmas and Birthday gifts and the £3000 gift you want to give to your GC. The 7 year rule therefore does not apply to any of these gifts. 

What approximately is your net worth? If it is below your nil rate bands then your estate will not pay IHT and the 7 year rule does not even need thinking about.

I am more than happy to be corrected but I don’t think that is correct. My understanding is that you can make as many gifts of £250 as you like. That is one exemption. If, however, you wish to avail of the £3000 exemption to a person , you must reduce that £3000 by any £250 gifts made to that person but only that person. I think my link explains that. 

Small gifts up to £250

You can give as many gifts of up to £250 per person as you want during the tax year as long as you have not used another exemption on the same person.

You can, but the OP has gifted 2 lots of £250 to each person so total gifts of £500 which is covered by the £3000 annual allowance rather than the £250 rule. It is possible that these gifts could fall under the gifts from excess income exemption, if the OP has any.

Excellent. I see now. So, the £250 small gift is also per person and, if used once, cannot be used again. 

So, the op can make a gift to the grandson of £2750 maximum this year. The first gift of £250 is covered by the small gift exemption. The second £250 reduces his £3000. However, as mentioned, there is a carry forward and the full £3000 can thus be made.

It’s late but I have learnt something. Thank you!