IHT £250 small gift exemption

pysifr

The guidance on all websites., even Gov.uk is contradictory. These two consecutive statement on an accountant's web site set out the contradiction.

"You can also make small gifts of up to £250 to as many people as you like throughout the year. This small gift exemption allows you to give these smaller amounts without worrying about tax, as long as the recipient hasn’t received any other gifts from you covered by the £3,000 annual exemption.

AND 

For example, if you wanted to give £200 to each of your five grandchildren, you could do so entirely tax-free using the small gift exemption, provided they don’t receive any additional money from you within that same tax year.

These two statement mean totally different things. The first relates only to part or all of the £3000 exemption. The second could also relate to gifts out of income.

I give my granddaughter £1200 annually) - £100 per month out of income, can I also give her the "small gift allowance of £250. Or alternatively, use the £250 small gift allowance to offset the cost of the  £1200? 

DRS1

Based on what you have quoted the answer is No and No.
You are giving her more than £250 in the year so the small gifts exemption is not relevant.
You should decide what exemption you want to cover the gifts and then make sure you document how the gifts to your granddaughter meet the exemption.
Or if you want her to grow up to be a lawyer or an accountant you could cut her gifts to £250 a year explaining that it is all down to the IHT rules and let her work out (and explain to you) how you could actually give her a lot more and save IHT on it.

Pat38493

Does this include giving kids money for Xmas, Birthdays etc?  Frankly we have given our kids money for various things and I am pretty sure we give them more than £250 each per year, some of which is gifts for Xmas and so on.  It would have never crossed my mind that if I then died within 7 years, someone would go through all my bank statements to see if I had gifted money to my kids for relatively small amounts like that.  

I’d be interested to know at what age people generally start keeping records of such things.

Further, what if you are giving your kids a lot of money to help at University - is there an exemption for that?

Keep_pedalling

If you are gifting anyone more than £250 a year then no you can’t include those gifts as small gift exemptions. 

Anyone who is gifting to reduce their potencial IHT liability should keep good records regardless of their age. If on the other hand your net worth is well below IHT territory you don’t really need to bother although it would help your executors if you did.

DRS1

There is a special exemption for wedding gifts but not for birthdays or Christmas.  I think they would fall under the gifts from income provision if they weren't within the £3000 exemption.  The gifts from income provisions have been discussed a lot on here including the sort of record keeping that is advisable.

daveshep26

Pat38493 said:

Does this include giving kids money for Xmas, Birthdays etc?  Frankly we have given our kids money for various things and I am pretty sure we give them more than £250 each per year, some of which is gifts for Xmas and so on.  It would have never crossed my mind that if I then died within 7 years, someone would go through all my bank statements to see if I had gifted money to my kids for relatively small amounts like that.  

I’d be interested to know at what age people generally start keeping records of such things.

Further, what if you are giving your kids a lot of money to help at University - is there an exemption for that?

Parents (or a guardian) can give educational ‘maintenance’ funding to children without concerning themselves with IHT - n b. This wouldn’t be available to grandparents

https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm04175

Madeinireland101

What would stop someone giving £250 to 10 different people and those 10 people then choosing to give £250 to your child. That way you have managed to effectively give £2500 to your child without breaking any rules and assuming you have only an informal understanding that they will onward gift the money no one could say it’s a gift with reservation. I know you can give them £3k already but am assuming you have already done that 😀

MetaPhysical

These thresholds have not increased since the early 1980's.  If you help your kids with the money to buy a car it is IHT liable.  A wedding and xmas gifts will be liable too, so small are the thresholds in 2025.

westv

I can't imagine anybody would take note of such small amounts for IHT purposes.