Wedding gift exceptions to IHT

jf20938

Younger son is getting married. Lovely girl, Mum & Dad couldn’t be happier…etc. 

In respect to wedding gifts which are not subject to Inheritance Tax, the gov.uk website offers this:

Gifts for weddings or civil partnerships

Each tax year, you can give a tax free gift to someone who is getting married or starting a civil partnership. You can give up to:

• £5,000 to a child
• £2,500 to a grandchild or great-grandchild
• £1,000 to any other person

The first sentence seems ambiguous: one gift per year from the giver (to one person) or multiple gifts per year from the giver (to different people). 

Specifically then, can my wife and I give a total of £12k to the couple (£5k+£1k from each of us?). Similarly, can my mother (son’s grandmother) give £3.5k? 

To the sums that each of Mum, Dad and Grandmother can give above, I believe each can add £3k annual exemption, as long as that’s not been used already. 

In my family situation, that seems to total £12k+£3.5k+£9k=£24.5k. 

Seems much more then published figures. Too good to be true? 

Ref: https://www.gov.uk/inheritance-tax/gifts

Grumpy_chap

jf20938 said:

Younger son is getting married. Lovely girl, Mum & Dad couldn’t be happier…etc. 

In respect to wedding gifts which are not subject to Inheritance Tax, the gov.uk website offers this:

Gifts for weddings or civil partnerships

Each tax year, you can give a tax free gift to someone who is getting married or starting a civil partnership. You can give up to:

• £5,000 to a child
• £2,500 to a grandchild or great-grandchild
• £1,000 to any other person

The first sentence seems ambiguous: one gift per year from the giver (to one person) or multiple gifts per year from the giver (to different people). 

Specifically then, can my wife and I give a total of £12k to the couple (£5k+£1k from each of us?). Similarly, can my mother (son’s grandmother) give £3.5k? 

To the sums that each of Mum, Dad and Grandmother can give above, I believe each can add £3k annual exemption, as long as that’s not been used already. 

In my family situation, that seems to total £12k+£3.5k+£9k=£24.5k. 

Seems much more then published figures. Too good to be true? 

Ref: https://www.gov.uk/inheritance-tax/gifts

I don't know the legal position, but I think you are suggesting you would gift:

• £5k to your son
• plus £1k to your son's new spouse "any other person"

Then the same type of arithmetic gifting from your wife and from your mother.

Applying simple lay-person's logic, it would seem unusual to make a gift to the two halves of a new marriage as gifts to the individuals and not gifts to the couple.  Surely, the whole idea of marriage is all around "two become one" unless I am being entirely grumpy and old fashioned.

These exemptions are actually only relevant if you die in the next seven years.  Even then, only if IHT would have applied in any case - is your estate large enough to incur IHT?

Irrespective of the above, I would say to gift your son and his new wife what you would like (and can comfortably afford) to gift and i am sure they will appreciate the support in setting up home.  If you make the gift now, you get to see the benefit of it, then:  

• If you survive 7 years from the wedding, then the IHT is avoided.  
• If you don't survive the 7 years, then some of the gifted amounts may be subject to IHT on the sliding scale depending upon when you pop your cloggs.

If you don't make the gift now, then the amount you did not gift for the wedding is part of your estate at death and subject to IHT in full, assuming the estate is large enough to fall within IHT.

Gifting can never result in a higher IHT liability than not gifting.

I really think the focus on gifting to avoid IHT is the wrong approach.  People should gift because it makes them happy to have gifted - I recently gave a gift to my Niece and her new Husband for their wedding.  Of the many things in consideration about how much to gift, IHT never crossed my mind.

Jeremy535897

jf20938 said:

Younger son is getting married. Lovely girl, Mum & Dad couldn’t be happier…etc. 

In respect to wedding gifts which are not subject to Inheritance Tax, the gov.uk website offers this:

Gifts for weddings or civil partnerships

Each tax year, you can give a tax free gift to someone who is getting married or starting a civil partnership. You can give up to:

• £5,000 to a child
• £2,500 to a grandchild or great-grandchild
• £1,000 to any other person

The first sentence seems ambiguous: one gift per year from the giver (to one person) or multiple gifts per year from the giver (to different people). 

Specifically then, can my wife and I give a total of £12k to the couple (£5k+£1k from each of us?). Similarly, can my mother (son’s grandmother) give £3.5k? 

To the sums that each of Mum, Dad and Grandmother can give above, I believe each can add £3k annual exemption, as long as that’s not been used already. 

In my family situation, that seems to total £12k+£3.5k+£9k=£24.5k. 

Seems much more then published figures. Too good to be true? 

Ref: https://www.gov.uk/inheritance-tax/gifts

Sounds right to me, but as Grumpy points out, it only becomes relevant if the donor dies within seven years of the gift, and has an estate chargeable to IHT.

Grumpy_chap

Jeremy535897 said:

Sounds right to me, but as Grumpy points out, it only becomes relevant if the donor dies within seven years of the gift, and has an estate chargeable to IHT.

I'm actually more grumpy about the idea of a wedding gift to Mr Newlywed of £5k and Mrs Newlywed of £1k - it really does not bode well for their happy futures together if they can't simply be given one cheque for whatever sum to Mr & Mrs Newlywed so equals in the marriage.  Even the most rocky weddings must last in sufficient harmonious bliss to survive from the ceremony up until bank opening times to deposit the cheque...

Jeremy535897

Grumpy_chap said:

Jeremy535897 said:

Sounds right to me, but as Grumpy points out, it only becomes relevant if the donor dies within seven years of the gift, and has an estate chargeable to IHT.

I'm actually more grumpy about the idea of a wedding gift to Mr Newlywed of £5k and Mrs Newlywed of £1k - it really does not bode well for their happy futures together if they can't simply be given one cheque for whatever sum to Mr & Mrs Newlywed so equals in the marriage.  Even the most rocky weddings must last in sufficient harmonious bliss to survive from the ceremony up until bank opening times to deposit the cheque...

If annual exemptions are available for two years, each parental donor could give £12,000 (£6,000 annual exemptions and £6,000 wedding exemptions). Allocate £5,000 annual exemption each to the non-child spouse and the gifts could be equalised.

Grumpy_chap

Jeremy535897 said:

If annual exemptions are available for two years, each parental donor could give £12,000 (£6,000 annual exemptions and £6,000 wedding exemptions). Allocate £5,000 annual exemption each to the non-child spouse and the gifts could be equalised.

Thank you.  I am now doubly-please for the newlywed couple; not only are they starting as equals in the marriage but the Groom's Mum & Dad both gave them double the gift

jf20938

Thank you all. 

I completely agree with the misgivings about separate and unequal gifts to the future Mr and Mrs.  It's just that the wording on the uk.gov website doesn't refer to couples; it refers to individuals.  I was following that lead and wondering how far HMRC's exception would stretch. 

And yes, this is part of a bigger plan to manage IHT.  Using the annual exemptions in the way Jeremy535897 suggests is an excellent approach that I hadn't thought of. 

Cheers - J.

Grumpy_chap

Of course, a more fun way to resolve the IHT issue is to just spend it all on fast cars (and other frivolous depreciating assets) and luxury holidays (or other expensive experiences that simply consume the money).

Failing that, give everything to Mr & Mrs OPSon, then take care to live another seven years so that there is no IHT liability.