Inheritance tax gifts, reliefs and exemptions
As mentioned, married couples and registered civil partners are exempt from inheritance tax, as long they live in the UK. People in certain careers are also exempt if they die in active service, including police, paramedics, firefighters, members of the armed forces, and humanitarian aid workers. This exemption also applies if an injury sustained in active service leads to a person’s death later down the line.
Annual exemption
There are some rules on giving gifts. This means that each year you can give away up to £3,000 worth of tax-free gifts – including money, stocks and shares. This sum can be rolled over for a maximum of one year if you don’t gift the full amount in the first year.
However, some gifts might be taxed after your death. Your loved ones won’t have to pay inheritance tax on your gifts as long as you live more than seven years after you make the gift. This is known as the seven-year rule.
Small gift allowance
There’s a small gift allowance, that enables you to give as many gifts of up to £250 per person as you want each year. However, you shouldn’t have used another gift allowance on the same person.
Gifts for weddings or civil partnerships
Each tax year, you can also make a tax-free gift to your loved ones if they’re getting married or starting a civil partnership. More specifically, you can give up to:
£5,000 to a child
£2,500 to a grandchild or great-grandchild
£1,000 to any other person
You can combine a wedding gift allowance with any other allowance, except for the small gift allowance.
Gift to charities
You can make gifts to organisations such as charities, museums, and universities, which are exempt from inheritance tax.
Gifts to help with living costs
You could offer financial support without paying tax to your former spouse, elderly dependent or child in full-time education if they’re struggling financially.
Gifts from your surplus income
You can buy gifts from surplus income as long as this doesn’t impact your standard of living.