Christmas is the season of giving – and what better gift than one that can provide some financial security for your loved ones while being tax-efficient?
As the year comes to a close, it’s the perfect time to take advantage of HMRC’s gifting allowances, which allow you to transfer wealth to family and friends without triggering inheritance tax (IHT).
Here’s a quick guide to the gifting rules and how you can use them to spread some festive cheer while reducing the size of your taxable estate.
The Annual Exemption – Your Go-To Tax-Free Gift
Each tax year, you can gift up to £3,000 free of inheritance tax under HMRC’s Annual Exemption. If you didn’t use your allowance last year, you can carry it forward, meaning you could give away up to £6,000 this Christmas.
For example:
- A parent could gift £3,000 to their child this year and still retain £3,000 from the previous year if unused.
- This exemption applies to each individual, meaning both partners in a couple can use their allowances, doubling the gifting potential to £6,000 annually (or £12,000 if the previous year’s allowance is carried forward).
Small Gifts Allowance – Perfect for Stocking Fillers
You can also make smaller tax-free gifts of up to £250 per person to as many people as you like, provided they haven’t already benefited from your £3,000 Annual Exemption.
This is a great way to give thoughtful gifts to extended family, friends, or even grandchildren without worrying about tax implications.
Wedding or Civil Partnership Gifts
If someone in your family is getting married, consider gifting them an additional tax-free amount:
- Up to £5,000 to a child
- Up to £2,500 to a grandchild or great-grandchild
- Up to £1,000 to anyone else
This allowance is on top of the Annual Exemption, so it’s a valuable way to support a loved one’s special day.
Why Gifting Matters
Taking advantage of these allowances doesn’t just benefit your loved ones; it also helps reduce the size of your taxable estate. With inheritance tax rates at 40%, proactive gifting can significantly lower future tax liabilities, ensuring more of your wealth stays within your family.
A Thoughtful End to the Year
Christmas is a time to reflect, connect, and show appreciation. By using your tax-free gifting allowances, you can give meaningful, lasting gifts to the people who matter most – whether it’s a financial boost for their future or a heartfelt gesture that creates memories.
Need Guidance?
Tax rules can be complex, but with the right advice, you can make the most of your allowances. If you’d like to discuss how to gift tax-efficiently this Christmas, or explore broader estate planning options, we’re here to help.
| The Legacy of Uncle Peter’s Wisdom
A successful hotelier and businessman, Moira’s Uncle Peter didn’t just share his advice with her – he passed it on to her daughters as well. On each of their birthdays, he sent two cheques; one for a small amount they could spend, and a larger cheque they were encouraged to save for the longer term. That simple, thoughtful gesture taught them the value of financial planning from an early age. They diligently stuck to his plan, and thanks to good old index-linked savings certificates, those early gifts are still intact today. Uncle Peter’s approach to gifting is a wonderful example of how even small, intentional gestures can make a lasting impact, building financial habits that endure across generations. |
Let’s make this Christmas a season of giving—not just today, but for the future.
