Did you know gifts avoid inheritance tax? Use the small gift allowance. It’s discussed most at Christmastime, as that’s when folk tend to give several gifts of modest value.
Size Isn’t everything
Most recognise their responsibility to their families, they therefore want as little as possible of their wealth to go in taxes. You can reduce the tax payable on your estate, there are lots of allowances for this. However, most people overlook the small gift allowance. This is a shame as it’s valuable
Knew Talent As She Saw It
My aunt Sally – my auntie is called Sally. Stop sniggering. Auntie Sally’s neighbour, Janice at 25 is a prodigious talent. Janice teaches English at her local secondary school and is a master of the piano. My aunt thinks Janice’s DX7 is a mockery of her skill. Long story short, Janice bought Sally’s Steinway piano at a discount of £6,000.
In inheritance tax terms, the discount is a gift. Sally used the exempted gift rule. By this rule, one may give away £3,000 worth of gifts each year. One may carry any unused annual exemption forward to the next year. Gifts made using the annual exemption do not count towards inheritance tax liabilities arising on the donor’s estate.
Remember the limit – £250 to each person each year.
Mix & Match Not
Just a word of caution, one may not use the £3,000 rule and the £250 rule on the same person in the same year. That’s them rules. So, there we have it – a £6,000 gift towards a Steinway.
Remember, gifts avoid inheritance tax. You should know your allowances, so you know how to use them. That way, you’ll reduce the amount of inheritance tax payable on your estate.
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