The Annual Allowance

With the end of the current tax year fast approaching, anyone wishing to use their 2023/24 (and potentially their 2022/2023) annual allowance in relation to gifts only has a limited time to do so.

Each tax year, you can give away up to a total of £3,000, with no impact on your estate for inheritance tax purposes. This is part of the Annual gifting allowance 2024, which allows individuals to make tax-efficient transfers of wealth. If you have not used the previous year’s allowance, this can also be ‘rolled forward’ and utilised. This means your estate could benefit from gifting up to £6,000 tax-free before 5 April 2024.

The current tax year’s exemption is used first before bringing forward the previous year’s unused allowance. As such, if you failed to use your 2022/23 allowance in that tax year, it will be completely lost from 6 April 2024.

Gifts Over £3,000

You can make larger gifts of more than the annual allowance if desired. Providing you survive making the gift by seven years and do not retain any benefit from it, the value of the gift will fall outside of your estate for inheritance tax purposes. This could reduce the inheritance tax payable on your estate when you die, depending on the size of your estate and adherence to inheritance tax rules 2024.

Understanding gift tax exemptions and keeping detailed records of such transactions is crucial. Documenting and storing information with your Will or key investment documents ensures your Executors can easily access the necessary information at the time of your death.

If you don’t survive making larger gifts by seven years, your nil rate band will be reduced by the value of the gift (less available exemptions). The nil rate band is the amount available before inheritance tax is payable on your estate. It is currently £325,000, and the standard rate of inheritance tax (IHT) is 40%. The nil rate band has been frozen at £325,000 since 2009 and will remain so until 2028.

Small Gifts and Marriage Gifts

You can make small gifts of up to £250 to as many people as you wish in each tax year, provided you have not used your Annual gifting allowance 2024 on the same person.

Additionally, gifts in consideration of marriage are allowed up to the following amounts:

• £5,000 for a child
• £2,500 for a grandchild
• £1,000 for any other person

These financial gifts for family are exempt from inheritance tax implications.

Other Allowances and Exemptions

Additional UK tax planning strategies may also apply depending on the assets in your estate and the beneficiaries named under your Will. Leveraging available tax-free gifts UK options alongside other exemptions can significantly impact your long-term estate planning goals.

If you would like to discuss lifetime gifting, inheritance tax, estate planning, or review your Will, our Wills, Trusts, and Probate team would be happy to assist.

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