Christmas gifts over £250 may incur Inheritance Tax! Here’s what you need to know.

5 Christmas Gifts you can give this year – Inheritance Tax-Free


With Christmas just around the corner, you may be pondering what gifts you can give your spouse, children and grandchildren.

To your spouse or civil partner, you can gift as much as you like, Inheritance tax-free. However, for your children,

grandchildren or anyone else, it’s a different matter.

Perhaps they are heading off to university, getting married or they are thinking about buying their first home next year and you’d like nothing more than to give them a gift this Christmas that can really help them on their way.

If that’s the case you need to be aware that giving away parts of your estate, whether that be money or assets could be liable for Inheritance Tax.

However, there are ways you can mitigate that and still surprise your family.


Tax-Free Small Gifts

You can gift up to £250 to any number of people without there being any Inheritance Tax implications. The only stipulation is you do not give any more than £250 to any individual. So grandparents with money to spare, go for it, you can spoil your grandchildren without any concerns from the tax man.


Tax-Free Annual Gift Allowance

If you want to give more than £250 to any one individual then be aware your annual gift allowance is £3000, which means each year you can give a gift of something from your estate (assets or money) to the value of £3000 without there being any Inheritance Tax to pay.

This means as a couple, together you could gift something to the value of £6000. However, if one or both of you didn’t use this gift allowance in the previous tax year you can bring it forward. So you now have the ability to gift up to the value of £12,000 – if you so wish.

Anything gifted over this value will be liable for Inheritance Tax for the next 7 years.


Tax-Free Wedding gifts

These are also exempt from Inheritance Tax. You can gift £5000 tax-free to a child, £2500 to a grandchild or great-grandchild and £1000 to anyone else. So if a family member has just announced their engagement this could be a tax-efficient way to surprise them this Christmas.


Give to Charity

You can gift any amount to charity without incurring any Inheritance tax. Plus if you leave 10% or more of your estate’s net value to charity, your heir’s inheritance tax liability on the remainder of your taxable estate will reduce from 40 % to 36%


Setting up a Trust

If you want to gift more than your annual allowance you could set up a family trust with you as trustees, meaning you have more say in how the money is used. If you survive for 7 years after the trust is set up then the value in the trust will not be liable to inheritance tax.

A simple “bare trust” or “absolute trust” means the beneficiaries have access to do what they like with the money when they reach adulthood i.e. 18 years old.

A “discretionary trust” is slightly more complicated but can be tailored to suit your requirements and the future needs of the beneficiaries and the trustees can decide when the assets will be distributed.

Deciding on which type of trust, the trustees and tax implications can be complicated so if you are thinking of setting up a trust for your family get in touch for a free no obligation consultation.

Whatever you decide to give this year, we hope you enjoy a very Merry Christmas and a prosperous and peaceful New Year.


For more information get in touch with us at Just Wills and Legal Services on 01342 477102 to book a free consultation.

This article is for general information only and does not constitute legal advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.

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