Understanding UK Gifting Rules: £3,000 Tax-Free Gifts

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Want to gift money to your children? Find out how the £3,000 annual exemption works in the UK and how it can help with inheritance tax planning. Fraser Bond can assist you with expert advice.

BROWSE PROPERTY LISTINGS

Yes, in the UK, you can gift up to £3,000 per year to each child or other individuals without incurring inheritance tax. This is known as your annual exemption. Here’s how it works:

The Annual Exemption

£3,000 per year: You can gift a total of £3,000 each tax year without it being added to the value of your estate for inheritance tax purposes. This £3,000 can be given to one person or split between multiple individuals.
Unused exemption: If you haven’t used your £3,000 exemption from the previous tax year, you can carry it over to the current year, allowing you to gift up to £6,000 in total. However, this can only be carried over for one year.

Additional Small Gifts

Up to £250 per person: On top of your annual exemption, you can give gifts of up to £250 to as many people as you like each tax year. However, you cannot combine this with your £3,000 exemption for the same person.

Exemptions for Special Occasions

There are also specific exemptions for weddings and civil partnerships:

Up to £5,000: You can gift up to £5,000 to a child for their wedding.
Up to £2,500: Gifts for a grandchild’s wedding.
Up to £1,000: For anyone else’s wedding or civil partnership.

Potentially Exempt Transfers (PETs)

If you want to gift more than these exempt amounts, you can do so, but the excess may be subject to inheritance tax if you pass away within seven years of making the gift. These larger gifts are called Potentially Exempt Transfers (PETs), and they become exempt from inheritance tax if you live for seven years after giving the gift.

Conclusion

In summary, yes, you can gift up to £3,000 per year to your children without worrying about inheritance tax. This allowance can help reduce the value of your estate while benefiting your children. For any larger gifts, be aware of the seven-year rule for inheritance tax. If you need advice on estate planning or want to structure gifts for maximum tax efficiency, Fraser Bond can provide expert guidance tailored to your situation.