Most gifters are ‘unclear on inheritance tax rules’
Most people making gifts of money or assets are unaware of inheritance tax rules that might apply to them.
HMRC polled 2,090 people and found that only 25% of those who recently made a gift had a working knowledge of the rules.
Less than half (45%) were aware of the rules or exemptions surrounding inheritance tax when they made their largest gift.
Only 8% of gifters considered inheritance tax rules before making a gift, the research showed.
Inheritance tax will potentially apply on gifts where a donor dies within seven years of making the gift or on a chargeable lifetime transfer into a relevant trust or company.
Within these rules are exemptions, such as gifts to a spouse or civil partner, charity or a political party, while an annual exemption on gifts worth up to £3,000 applies.
Should the donor die within three years of making the gift, inheritance tax of 40% will apply if the estate is worth more than £325,000.
Gifts made between three and seven years before the donor’s death are taxed on a sliding scale known as taper relief.
Among gifters who were aware of the rules, 18% said they were influenced by them when they made their largest gift.
More than a quarter (28%) of gifters had sought advice from either GOV.UK or professional tax advisers.
For further information on Inheritance Tax Rules, please contact Matthew Magee on 023 8046 1207.