Inheritance Tax- Gifts

candish63

Hi,

My mum would like to give gifts to her family, whilst she is still alive and able to see them enjoying them. She is in her 80's and does not have many years left.

Her estate will be over the nil rate for inheritance tax.
She would like to give as little as possible away in tax when she dies.  She does not want to give her hard earned money to the government.

She has given the one off allowance of £3000 and £250 gifts to her family and has set up regular pocket money payments to her grandchildren.

She would now like to give christmas gifts in the form of money.  What is an acceptable sum per person? 

She would also like to buy her grandchildren a piano as a gift to continue their learning. (they currently play on an old one with sticky keys) This is likely to be around £3000, is this too big a gift?

What else can she do to?

Any advice would be appreciated.

Sue 

Jeremy535897

I assume your grandmother has made no gifts in the previous seven years, other than those covered by exemptions?

The first point to remember is that if grandmother's non-exempt gifts are with her nil rate bands, there will never be any inheritance tax on them. All they do is reduce the nil rate band available on her death. If she lives for seven years after making them, they will not reduce those nil rate bands.

The second point to consider is what her nil rate bands might be, and that will depend on whether her husband used his nil rate bands (depending on whether they remained married when he died, and how long ago that was, and what her house is worth).

She should record the pocket money arrangements if these are likely to fall within the normal expenditure out of income exemption and it is this exemption that deserves further investigation. See:
https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm14231

candish63

Thanks I am a total novice.
My mum is very unlikely to last 7 years.
My dad died in July this year and left everything to my mum. (they were still married)
Their house value is £255k. The net value of his estate was approx £100k
She is leaving everything to me and my brother, 
So I am assuming the threashold will be £500k.

Does her christmas gifts  have to be within her regular income or can she use some of her savings?

Keep_pedalling

candish63 said:

Thanks I am a total novice.
My mum is very unlikely to last 7 years.
My dad died in July this year and left everything to my mum. (they were still married)
Their house value is £255k. The net value of his estate was approx £100k
She is leaving everything to me and my brother, 
So I am assuming the threashold will be £500k.

Does her christmas gifts  have to be within her regular income or can she use some of her savings?

You have not allowed for the transferable NRB from your father’s estate which based on the house value would mean her estate would have exemptions totalling £905k so unless she has massive savings that you have not mentioned she is a long way from having to consider any form of IHT planning.

If she dies within the next 7 years then any non exempt gift will still form part of her estate but it won’t matter as it still won’t be subject to IHT..

There are no rules on how much you can give away, we don’t have gift tax in the UK so if she has the means then she could buy a Steinway for her GC if she so wished. As long as she does not give so much away that she could not afford to cover things like emergency repairs to the house it should be fine.

Albermarle

Read this carefully
Inheritance Tax | Income and Tax | Age UK

candish63

Thanks for everyone's help.