In years gone by, I’ve slaved over the perfect gift for my loved ones, agonising over the colours, the sizes, the price, will they love it? Will they use it? Nothing’s worse than spending all that time and effort in the crowded Christmas streets, only to see disappointment glaze over a loved one’s eyes with a meek thanks. It wasn’t what they wanted…
Trying to quickly understand the latest fads in kids’ toys is a degree-worthy topic in itself. Many appear fun and exciting to begin with yet come Boxing Day, attention’s drawn to something else shiny and new (while the now-irritating sound of a somersaulting toy dog threatens the pleasure sought in that last sherry).
Appreciation and Gifting
There’s a magic to giving gifts which is almost sacred, yet in today’s financial environment the act of gifting to children and grandchildren is not deemed as sacred as it once was. Like a jealous sibling on Christmas Day, HM Revenue & Customs (HMRC) always wants a slice of the fun.
There are however some exemptions that can allow you to give now and more fundamentally, help younger family generations begin to appreciate and understand the importance and utility of money.
Here are a few ideas around gifting to the next generation where you can give now, free of Inheritance Tax (IHT) for their benefit later…
I’d like to focus on gifts out of income, as I feel it potentially has the largest benefit out of these options and is often underutilised.
There are certain clauses (and not Santa Clauses) that gifts out of income must adhere to. Under current rules, a gift should be exempt from IHT if it complies with certain conditions as below:
It is important that all three of these tests are satisfied separately and this will be dependent on each individual’s own personal circumstances.
Some potential ways in which you can wrap this gifting from income are;
As always, if there are any questions or if you’d like to speak in more detail about the gift allowances and the opportunities available based on individual circumstances, please speak with your Courtiers Adviser or contact us for an initial discussion.
Happy gift giving!
Please note that tax treatment depends on individual circumstances and may be subject to change in the future.
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