HCR Law Events

10 March 2023

Gift-giving and inheritance tax

HMRC recently revealed that inheritance tax receipts for the period April 2022 to January 2023 totalled £5.9 billion, which is an increase of £0.9 billion from the same period for the previous year.

Each individual has an inheritance tax-free threshold known as the “nil-rate band”. The nil-rate band has been set at £325,000 since April 2009 and has been fixed at this rate until the 2027/28 tax year. In certain circumstances, the residence nil rate band may also be available to offset against an estate. This is an additional allowance of up to £175,000. Any amount above the available allowances is subject to inheritance tax at 40%.

Gifts an individual makes in their lifetime can reduce the nil rate band available for use against their estate on death, however there are various gift exemptions available.

Gifts made to your spouse or civil partner or a charity are exempt from inheritance tax. Each individual has an annual exemption of £3,000 and any gifts made up to this amount are exempt from inheritance tax. In addition to the annual exemption, you can also make gifts of up to £250 per person to an unlimited amount of people in any one tax year, although it is important to note that if the total gifts to one person exceed £250 this allowance cannot be applied to the first £250 of the gifts made.

Gifts made on the occasion of a wedding or civil partnership can also be exempt from inheritance tax: each parent can give £5,000; each grandparent can give £2,500; and any other person can give £1,000.

There is also an allowance for regular gifts made out of excess income.  In order for gifts to qualify for this exemption, there must be a regular pattern to the gifts and the person making the gifts must have surplus income above their requirements.

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About the Author
Alexandra Svennevik, Associate (TEP)

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