It is important that you plan ahead for when you die. As well as ensuring that your loved ones are provided for by making a Will, you also need to make sure that you are aware of the reliefs and exemptions that are available to you if your estate might be worth more than the Inheritance Tax nil rate band. The current nil rate band is up to £325,000 (for a single person) or if you are married or in a civil partnership, the surviving spouse can use their husband/wife’s nil rate band as well as their own, potentially giving a nil rate band of up to £650,000.00 and this will remain so until 2012-15.
Gifts are treated in a number of ways for Inheritance Tax purposes. However, you only need to worry about making gifts if you think your estate – including the value of any gifts you make – might exceed the Inheritance Tax threshold when you die. If your estate is over the threshold, any gifts you make more than seven years before you die will be exempt from Inheritance Tax.
Some gifts made during your lifetime are exempt from Inheritance Tax because of the type of gift or the reason for making it.
Wedding or civil partnership ceremony gifts are exempt from Inheritance Tax, subject to certain limits:
Parents can each give cash or gifts worth £5,000
Grandparents and great grandparents can each give cash or gifts worth £2,500
Anyone else can give cash or gifts worth £1,000
You can give away gifts worth up to £3,000 in total in each tax year and these gifts will be exempt from Inheritance Tax when you die. You can carry forward any unused part of the £3,000 exemption to the following year, but if you don’t use it in that year, the carried-over exemption expires.
In addition to the annual exemption there are other exemptions for certain types of gifts. These are explained below. Regular gifts or payments that are part of your normal expenditure
Any regular gifts you make out of your after-tax income, not including your capital, are exempt from Inheritance Tax. These gifts will only qualify if you have enough income left after making them to maintain your normal lifestyle.
Monthly or other regular payments to someone
Regular gifts for Christmas and birthdays, or wedding/civil partnership anniversaries
Regular premiums on a life insurance policy – for you or someone else
If you would like more information on Estate Planning contact our Estate Planning Solicitors today.
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