• Annual £3,000 exemption – This exemption should be used by most people who have an inheritance tax problem, provided the capital is liquid and not tied up in property. The amount is per person and so each spouse can make a gift of £3,000 per financial year.
• Any part of this exemption not used in one year can be carried forward to the following year only. However, that year’s exemption must be used completely before using the part, which has been carried forward.
• For people with large IHT problems, a gift of £3,000 a year may not sound like it will have a large impact. However, consider that a married couple can gift £6,000 a year, and over 15 years this would place £90,000 outside of your Estate, thus saving £36,000 in inheritance tax.
• It is important to ensure the money does not come from capital or the 7 year rule will apply if its over £3,000 a year. Other gifts over £3,000 per year from capital made directly, are Potentially exempt transfers which fall back into your Estate if you do not survive 7 years after making the gift.

Gifts from one spouse or civil partner to another are always immediately free of inheritance tax. There is no limit as to the amount of the gift between spouses.

Each grandparent has an allowance of £2,500 in consideration of marriages of grandchildren. In this case, if the gift is to be effective for inheritance tax purposes, it has to be made before the wedding and of course, the wedding has to happen.

Each parent has a gifting allowance of £5,000 in consideration of the marriage of their children. It has to be gifted before the marriage and the marriage has to take place.

All gifts to registered charities are immediately exempt from inheritance tax. The same occurs for gifts to charities in your Will.

• Gifts for national purposes, political parties, housing associations and certain transfers to employee Trusts, are also free of inheritance tax.
• 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.

• This is a very under utilized allowance but is very useful for people who have a higher income than they use on a normal basis. These gifts must be regular and habitual. The intention to make them regularly should be recorded in writing, signed and witnessed. The document should then be kept with your Will.
• Any income that is potentially taxable for income tax can be used, including income from investments or property. Care must be taken as the funds must be from income and not capital.
• The regular gifts of income should also not affect your standard of living, and so producing an income and expenditure breakdown is also useful in the event the gifts are challenged by HMRC.

It is important to keep a written record of all gifts made. If applicable, advise your accountants of them so that they can be correctly dealt with from a tax and reporting point of view. This will also ensure you benefit from any available relief.

• Record your income and expenditure and keep bank statements and tax returns to prove the gifts are easily affordable and do not affect your normal standard of living.
• Do this annually to prove the money came from income. (Take care it’s not investment bond income as that is return of capital). Basically, its income if income tax is due on it.
• Document the reason and intention of the gift and specifically state it is not a loan.
• State it is to be made regularly (ideally monthly as the gift is immediately exempt) and have that document signed and witnessed and kept with your Will.

Gifts into Trusts are classified as Chargeable Lifetime Transfers in that, should the gift exceed £325,000, tax is immediately payable at 20% on the excess.

Do not make gifts into a Trust without proper and experienced advice as merely making gifts in the wrong order can potentially cause an increased tax liability.

Never make a gift of any part of your main residence without taking good advice. Normally, once income tax as been paid on the rental income and capital gains tax is applied to the growth of the percentage gifted, this is not worthwhile.