Struggling for gift ideas? Can’t remember if your niece likes Frozen or Inside Out? Will your uncle use a Kindle? Do your grandchildren have the new Star Wars BB-8? To make life easier for you, here are some gifting ideas from us at Sherrards (and some associated tax advice):
Don’t give dogs for Christmas, make PETs
Gifts to individuals are not taxed on the date the gift is made. These are called PETs. The donor must live for 7 years before the gift is completely out of their estate. If the donor dies within 3 years then the amount gifted is brought back into their estate and taxed appropriately.
If the donor dies between 3 and 7 years of the gift, then the rate of tax is reduced. This is known as tapering relief.
Buy your parents a cruise with the annual exemption
A total of £3,000 a year is exempt from the Inheritance Tax gifting rules. If you didn’t utilise your annual exemption last year you can add it to this year’s meaning you have a total of £6,000 tax free – enough to send mother and father to “see the Northern lights” for 2 weeks.
PS4 vs Xbox One
You can make unlimited gifts of £250 to unlimited recipients in a single year. You cannot, however, give the same person £250 more than once. So little Tommy will have to settle for one games console this year. The decision is, which one?
Pay for a child’s education
If you have surplus income (after tax) and have enough money to maintain your lifestyle then you can make gifts from this income to go towards a savings account for a grandchild, insurance policy premiums or (even more) gifts.
The less fortunate
Christmas is about giving. And who could benefit more than a charity? Luckily there’s no Inheritance Tax on gifts to charities, universities or amateur sports clubs so you can be as generous as you like!
We wish you all a Merry Christmas and a Happy New Year!