I have a confession to make. I started my Christmas shopping in November.
Yes, I know it is early and, yes, I know that I’m really breaking that “leave it to the last minute” stereotype – although, I have been that person once before, and am learning from my past mistakes.
Whether you are unnecessarily organised or a last-minute kind of person, we will soon be fully into the Christmas swing of things. Decorations are up, the Christmas marketing campaigns have started, the adverts are being released and, those with children, will be sending a letter to Santa at the north pole very soon.
For many, Christmas is very much a time of giving, but have you ever considered using this time as part of your own Inheritance Tax planning?
Gifting can be an effective way to reduce the value of your estate and, potentially, reduce the Inheritance Tax liability your estate might face. When thinking about making a gift, there are multiple different ways you could do this.
It is worth knowing that a ‘gift’ for tax planning purposes is anything that has a value. This could therefore be a financial gift, a particular asset or possession or even the loss of value of an item when it is transferred to another person.
For those closest to you, you might wish to utilise your annual gift allowance, also referred to as your annual exemption, of £3,000. This allowance is available each tax year and is not subject to the ‘7 year rule, meaning it will not count against your estate for Inheritance Tax purposes. If you have not used the previous tax years allowance, you can also carry this forward, meaning you could give away up to £6,000 without Inheritance Tax consequences.
For other family members and friends, you could consider taking advantage of the “small gift” exemption. This means that you could give them up to £250 each. There is no limit on the number of these gifts that you can make to different people, assuming you have not used any other allowance for that person in the tax year.
Finally, Christmas can be a charitable time of year and many will make a donation or gift to a Charity. There are many great charitable causes, both locally and nationally, that do any incredible work, not just at Christmas but all year round. As Charities are tax exempt for Inheritance Tax purposes, there is no limit on the amount you can give them and the gift does not effect any of the other allowances available to you.
Whether it be for Christmas or just in general, if you do seek to utilise gifting as part of your tax planning, it is good practice to keep a record of these. This could make your executors life easier as they might need to provide this information to HMRC when administering your estate.
There are many ways that you can consider tax planning as part of your wider estate planning, so please do get in touch with I or any of colleagues at Fisher Jones Greenwood on 01206 835261 or via email [email protected] and we would be more than happy to help.