Almost three quarters (73%) of parents and grandparents find HM Revenue and Customs' (HMRC) tax rules on gifts complicated, a study has found.

Retirement specialist, Key Retirement, surveyed more than 900 homeowners aged over 55 and discovered:

• 47% don’t understand tax rules on gifts.
• 38% were unaware their estate could be liable for Inheritance Tax (IHT) on gifts to family members.

Some reasons those polled gave for handing out financial gifts were:

• Helping their children and grandchildren pay off debts and student loans (18%)
• Helping fund a wedding for their children or grandchildren (13%).
   

Dean Mirfin, Technical Director at Key Retirement, said:

“There is a real nervousness and confusion when it comes to the awareness around the rules of financial gifting.

“At a time when the financial squeeze on younger generations is getting worse, it makes sense that grandparents and parents want to help their family now rather than waiting until their death.”

Seven-year rule

You can give away tax-free gifts worth up to £3,000 each financial year and any unused annual exemption can be carried over, but for one year only.

You can also give as many gifts of up to £250 per person as you wish during the tax year so long as you haven’t used another exemption for a gift to the same person.

In addition, some other types of gift, such as wedding or Christmas presents and gifts to charity, are exempt from IHT. 

If there’s IHT to pay, it’s charged at 40% on gifts given away in the three years before your death. Gifts given between three and seven years before you die are taxed at the following rates:

 

 

 

 

 

 

 

 

 

 

Get in touch

If you would like to find out more about IHT planning and other gifting options available, give one of our advisers a call on 01483 205890.