Given their significance, the inheritance tax (IHT) changes announced by Rachel Reeves in her first budget are likely to see the incidence of gifting increase, and although gifting might seem straightforward, there are numerous considerations to observe.
When gifting, the amount, timing, ordering and frequency can all be important. Evidence of gifts leaving the estate, as well as due regard to anti-avoidance legislation — such as ‘gift with reservation’ from 1986 and ‘pre-owned asset tax’ from 2006 — requires accurate record keeping.
Breaking this down further, gifts can be tax exempt, potentially tax exempt (to individuals and bare trusts) or chargeable lifetime transfers (to relevant property trusts), with potential interactions with other reliefs, allowances and exemptions. This complexity adds to the need for gifting strategies to be thoughtfully advised to optimise their effectiveness.
Approaching tax year end it is vital to remember the £3,000 annual gifting allowance, worth up to £12,000 per couple/civil partners, where not used in the previous tax year. This offers additional tax efficiency should it be invested in JISAs or childrens’ pensions. These considerations can easily be overlooked at this time of year, with the focus on ISA subscriptions, the pensions annual allowance and capital gains annual exempt amount.
Quilter Cheviot will be addressing the complexities of IHT-effective gifting at a series of events in the coming months. If you are interested in attending “The dying art of giving … resurrected”, presented by David Denton FPFS TEP, Head of Technical at Quilter Cheviot, please contact your business development manager or marketing@quiltercheviot.com.
David Denton, Head of Technical
