Getting Around Inheritance Tax

What are 'gifts'?

Gifts are transfers of assets from one person to another. It might be cash, works of art, antiques, furniture, houses, cars, or anything.

What happens to gifts given away less than seven years before I die?

If you give assets away to another person during your life and survive for seven years, then generally those gifts will be exempt from inheritance tax. If you die before the seven years have elapsed, then on a sliding declining scale an inheritance tax liability will have to be computed when you die.

How much can I give away each year without being taxed?

There are a range of very valuable exemptions here. There's more and more people who are beginning to worry about inheritance tax. Its important that they are aware of the gifts which can be made. The most common is that people can give away up to £3,000 in total to beneficiaries during a year without triggering the inheritance tax seven-year clock. They can give up to £250 per done by way of small gifts. If a family member is getting married, then they can make gifts. A parent can gift up to £5,000 to a child who is getting married, a grandparent £2,500, and another person £1000. There's a further very valuable exemption which people should be aware of. Individuals with large amounts of income, but low expenditure, will have surplus income. Its possible to agree with HM Revenue and Customs, an exemption from inheritance tax for gifts of surplus income. Before those gifts are made, the donor needs to be sure that they can do without the money. But once they're certain, those gifts, those transfers, these can be a great way of reducing their estate upon death, so saving the whole family inheritance tax.

Are any gifts exempt from inheritance tax?

Gifts to charity are exempt from inheritance tax. Some other small gifts are exempt as well.