Gifting out of surplus income

Nebbit

I have recently read this article https://www.thisismoney.co.uk/money/pensions/article-12656343/Pass-unlimited-wealth-loved-ones-TAX-FREE.html?ico=mol_desktop_money-newtab&molReferrerUrl=https://www.dailymail.co.uk/money/index.html&_ga=2.73525714.1101150202.1697980842-1059546739.1697980842&_gl=1*1k5s3tt*_ga*MTA1OTU0NjczOS4xNjk3OTgwODQy*_ga_XE0XLFFF16*MTY5Nzk4MDg0Mi4xLjEuMTY5Nzk4MDg3My4wLjAuMA..  I am sure members of this forum are aware of it. It seems like a good idea for my wife and I at the moment, having recently retired and become grandparents. Any comments? Thanks

eskbanker

Typical Daily Mail group clickbait about gifting 'unlimited wealth' when it clearly is limited to surplus income, but yes, it's no secret that it's an option to reduce IHT liability:

https://www.moneysavingexpert.com/family/inheritance-tax-planning-iht/#nogifttax
https://www.gov.uk/inheritance-tax/gifts

[Deleted User]

Indeed. Don’t ignore the ‘regular’ or ‘normal’ aspect of this. Read this and a few of the subsequent pages.

https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm14241

Flugelhorn

It is a useful way of "not increasing the assets even more than they are" to reduce IHT - doesn't help in reducing the already extant surplus

I give each adult child a sum every month and keep a spreadsheet to show that even with  giving them that + our normal spending, we still have a surplus at the end of the month. 

Keep_pedalling

Now is certainly a good time to help your children financially, both our children now have young families and our financial help has allowed both our daughter and DIL to be full times mums which they both wanted to do. No point in holding it back until you die when that will probably be approaching retirement themselves and you won’t be able to see your excess wealth put to good use.

If you joint net worth is over or approaching £1M then gifting from excess income is worth doing but you need to keep good records of both the gifts and income otherwise you are going to give your executors a difficult time claiming it.

dales1

Yes, keep good records of gifts, income and expenditure.

See HMRC form IHT 403.

I keep an analysis in this format, ready for my executor.

Nebbit

Many thanks for these useful tips