Gifts made to an individual or to a bare trust more than seven years before you die are free of Inheritance Tax, so it might be wise to pass on some of your wealth while you are still alive. This will reduce the value of your estate when it is assessed for Inheritance Tax purposes and there is no limit on the sums you can pass on. You can gift during your lifetime and this is known as a 'potentially exempt transfer'(PET).
If you live for seven years after making such a gift, then it will be exempt from Inheritance Tax. But should you be unfortunate enough to die within seven years, then it will still be counted as part of your estate if it is above the annual gift allowance. The Inheritance Tax charged may be reduced by taper relief on a sliding scale depending on which year during the seven years you died.
You need to be particularly careful if you are giving away your home to your children with conditions attached to it or if you give it away but continue to benefit from it. This is known as a 'gift with reservation of benefit'.
You can make certain gifts that are given favourable Inheritance Tax treatment:
- Charitable gifts made to a qualifying charity during your lifetime or in your Will;
- You can give away up to £3,000 each year;
- You can make small gifts up to £250 to as many people as you like Inheritance Tax-free;
- You can make regular gifts from surplus income after tax, but these need to be documented and lead to no reduction in standard of living for you as donor;
(England and Wales)
#investors-group
Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from taxation, are subject to change.
Congratulations @gardenwall! You have completed the following achievement on the Steem blockchain and have been rewarded with new badge(s) :
You can view your badges on your Steem Board and compare to others on the Steem Ranking
If you no longer want to receive notifications, reply to this comment with the word
STOPVote for @Steemitboard as a witness to get one more award and increased upvotes!