Christmas shopping usually means a visit to the high street or browsing online retailers, but the season of giving can be a good time to make sure you’re maximising your opportunities for Inheritance Tax reliefs.

While larger gifts may be taken into account for Inheritance Tax purposes, you can make certain gifts without Inheritance Tax being applicable. The Autumn Budget, heard on 30th October 2024, confirmed that the allowances for gifting (non business or non agricultural assets) legislation is not undergoing any changes at this point.

Broadly, the gifts that you can make come under two headings. There are gifts which attract an automatic allowance from Inheritance Tax and those where the allowance must be claimed if you die within seven years.

Gifts can include money, household and personal goods, property, land, and stocks and shares.

The small gift allowance means that you can give a gift of money up to a value of £250 to multiple recipients each tax year without it being considered for Inheritance Tax when you die. It is useful to know that if you sell something to someone for less than it is worth, then this may count as a ‘gift’ for these purposes.

The annual exemption allowance of £3000 can be used to make gifts to one or more people Inheritance Tax free. There’s an added benefit that if the allowance isn’t fully used in any year, any remaining allowance can be carried forward one year. It cannot however be combined with the small gift exemption for any one individual.

You may also know someone getting married or entering into a civil ceremony this Christmas and you can give a cash gift on these occasions which is Inheritance Tax free. The limit each tax year is £5000 for a child, £2500 for a grandchild, or £1000 for those outside immediate family.

Gifts whereby the Inheritance Tax free allowance must be claimed upon your death include an Inheritance Tax relief applicable to gifts out of your surplus income. So, you may make a regular gift of money such as a monthly contribution to a grandchild’s savings account and this may be Inheritance Tax free if the gift is part of a regular pattern and if you can demonstrate that you maintained your normal standard of living after making the gift. You should keep a good record of your income and expenditure in order for this relief to be claimed successfully.

Aside from the above, most other gifts of value made this Christmas may be considered for Inheritance Tax purposes if you die within seven years of making the gifts – these gifts are known as ‘Potentially Exempt Transfers’.

If you are considering making larger value gifts this Christmas and need some advice, or would like to discuss anything in this article, please contact our Wills, Tax & Probate team on 01953 606351 or email info@spiresolicitors.co.uk.