Ask the Expert: Do I need to cut down on my grandchildren’s Christmas presents?
Our reader this week is worried that giving Christmas gifts to her grandchildren could push her over the annual gift allowance. So should she be a little less generous? Carl Lamb of Almary Green responds.
I’m beginning to plan what I’m going to give my children, grandchildren and great grandchildren for Christmas this year.
I usually give them money of £50 each for my 18 great grandchildren, £150 each for my nine grandchildren and £250 each for my four children, but there are so many great grandchildren now, it’s going to take me above the £3,000 a year total gift allowance. Do I need to cut the amounts down now?
Response from Carl Lamb of Almary Green
Annual gift allowances are essentially there to stop people giving large amounts of money away to avoid paying Inheritance Tax.
The £3,000 is the total annual figure that you can give away without it being potentially considered as part of your estate if you die within seven years of making the gift.
However, under gifting rules, you are permitted to give away up to £250 per person to any number of individuals on top of the annual allowance, so none of the Christmas gifts you are planning to make will count towards your annual allowance – provided none of the family members have received other gifts from you during the tax year.
If you’ve given more than £250 to any individual in the tax year, then these gifts will count towards the annual figure (unless it was a wedding gift as there’s a special additional allowance for that).
The other point to make is that if you did exceed the annual gift allowance, the consequence is simply that there is a possibility that all or part of the gift might be assessed as part of your estate for Inheritance Tax (IHT) purposes if your total estate exceeded the appropriate Nil Rate Band on your death.
If your estate is likely to exceed the Nil Rate Band (which can be made up several elements, depending on your circumstances), then it may be worth consulting an independent financial adviser as there are strategies you can adopt to manage your future IHT liability.
If you value what this story gives you, please consider supporting the Eastern Daily Press. Click the link in the orange box below for details.