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What Are Lifetime Gifts?
Making gifts during your lifetime is an efficient way to reduce the value of your estate for inheritance tax purposes as well as providing benefits for your family. Managing the succession of personal and family assets is often at the forefront for many individuals’ minds and thus lifetime giving is very much the cornerstone of any successful tax and estate plan.
That said, lifetime giving can be fraught with difficulties and it is essential to consider the options available to the donor. When making lifetime gifts, it is important to take into account the personal circumstances of both the donor and donee. A gift should not be made to the detriment of the donor and likewise, the exact nature of the gift and its tax implications for all parties should be considered carefully.
UK Gift Tax
Is there a UK gift tax on lifetime gifts?
There is no separate lifetime gift tax in the UK. Depending on the circumstances, lifetime gifts can create an inheritance tax liability either at the time or when the person making the gift dies. For an example of how lifetime gifts can have inheritance tax implications, and how these rules compare to gifts made in the US, please see our articles on normal expenditure out of income and US/UK giving.
Gifting Money To Family
How much can you gift tax-free in the UK to children, family members, or friends?
An individual can gift up to £325,000 in a seven-year period without having to worry about inheritance tax on their death. Even for outright gifts in excess of this, there will be no inheritance tax to pay at the time, and if the donor survives the gift by seven years there will be no inheritance tax liability on their death. For more information on gifts to family members, please see our articles on gifting up a generation.
Gifting A House
What are the tax implications of gifting a house?
This will depend on the circumstances and whether you intend to live in the house, but there could typically be inheritance tax and capital gains tax consequences. For more information, please see our articles on how do I help my children buy a house, can I gift my holiday home or rental property to my children, and can I gift my home to my children and still live in it.
How can I gift a business or business assets?
Business assets can be gifted like anything else, but there are specific tax rules that should be considered. For more information, please see our article on how to efficiently gift business assets.
Gifts Out Of Income
Is there an effective way to make gifts out of income?
The rules for “normal expenditure out of income” mean such gifts can be very effective from an inheritance tax perspective. For more information, please see our article on normal expenditure out of income.
Transferring property into a trust
What are the benefits of transferring property into a trust in the UK?
This will depend on the circumstances and what you are trying to achieve, but trusts can offer a degree of control and some tax benefits. For examples of where trusts might be a useful way to provide for family members, please see our articles on [trusts and school fees], and the exposure of women to inheritance tax.
How should I approach charitable giving?
There are numerous benefits of charitable giving and it should be approached carefully to ensure that any such benefits are optimised. Please see our articles How should I approach charitable giving? and The Giving Pledge, and our podcast The Fine Art of Probate: Gifts and legacies
Can attorneys make gifts using a Lasting Power of Attorney?
Attorneys have limited powers to make gifts under a Lasting Power of Attorney. Please see our article Gifts and Lasting Powers of Attorney (LPAs)
What are the benefits of gifting art?
There are tax benefits of gifting art during your lifetime using the Cultural Gift Scheme or on death by way of the Acceptance in Lieu Scheme. Please see our articles Gifting in the Arts (CGS v AIL) and [CB Probate: Acceptance in Lieu]
How do I make gifts to a disabled child and/or a vulnerable person?
Making a gift to a disabled or vulnerable person must be considered carefully for their own benefit as well as for tax purposes. Please see our article gifting to vulnerable individuals.
What do I need to think about when making a gift with overseas elements?
Such gifts can be more complex, for instance, if the recipient or the assets are based outside the UK, and therefore need to be considered carefully. Please see our articles on foreign gifts and US/UK giving.