In theory, there are plenty of relatively small things you can do in your lifetime which should not adversely affect your standard of living. If you make best use of the available Inheritance Tax exemptions (IHT) over a number of years, substantial IHT savings could be achieved.
In no particular order:
- We all have an annual IHT exemption of £3,000 so gifts of up to £3,000 (or £6,000 for a married couple) – per tax year – can be made IHT free! The gift can be made directly to an individual or to a Trust. It can also be used to exempt part of a larger gift.
- Did you know that your unused IHT exemption can be carried forward for one tax year? So, if you’ve already gifted £3,000 this tax year (2023/24), you can gift another £3,000 before 5 April 2024 if you didn’t use your IHT exemption for 2022/23.
- Weddings provide another opportunity to make IHT free gifts. The maximum ‘marriage IHT exemption’ varies depending on the relationship (e.g. £5,000 from parent to child and £2,500 from grandparent to grandchild). Were you aware that these ‘marriage IHT exemptions’ apply per donor so, in the case of a married couple, they can often be doubled? The marriage exemption can also exempt part of a larger gift.
- Regular or habitual gifts from surplus income can also be made IHT free. This is an extremely valuable IHT exemption for those who enjoy a generous retirement income which is more than sufficient to meet their needs! It is important that meticulous record keeping is maintained during your lifetime to assist your Executors deal with your Estate. Gifts out of excess income can also be made to a Trust and/or individuals.
We’re often asked how potential IHT liabilities can be reduced. You would be quite surprised how embarking on a pattern of regular lifetime giving over a number of years can make quite a difference!
We are here to help you understand IHT and how you and your loved ones could be affected – call CKLG on 01223 810100 for friendly help and advice.
