There have been a number of programmes and articles recently on the inequalities of lockdown and where the burden of repaying UK government debt should fall. I think it inevitable in the foreseeable future that our Inheritance Tax (IHT)/gift tax regime is going to change and the tax cost of making gifts increase. If you can afford to make lifetime gifts as part of your estate planning, I would encourage you to move this up your agenda.

As a tax and estate planning solicitor working in this community, I see my role to try and communicate issues that I think those who read these inserts might find interesting and should have on their radar.

I think we presently have a generous IHT regime for making gifts. So long as you can afford to give away, you can give away unlimited wealth free of IHT and make no IHT return to HMRC provided the transfer is by an individual by way of gift

  • To another individual; on condition that
  • The recipient takes possession and enjoyment of the property at the date of the gift or 7 years before the donor’s death if later; and
  • After the date of the gift, the property is enjoyed to the entire exclusion or virtually to the entire exclusion of the donor including at any time in the 7 years before the death of the donor.

Similarly generous rules apply when creating a trust for someone who is ‘disabled’.

A charge to Capital Gains Tax (CGT) on the donor can inhibit the making of lifetime gifts. Where the asset gifted is something other than cash, as a general rule the donor is deemed to receive consideration equal to the market value of the asset disposed of and CGT is due on the disposal.

In certain limited cases this charge to CGT can be ‘held over’ meaning the gift recipient takes the asset at the donor’s CGT base cost. This result can usually be achieved where:

  • The gift or transfer is of business assets to an individual or a trust; or
  • Where the transfer is a ‘chargeable transfer’ for IHT purposes e.g. a lifetime transfer into a trust.

If you think I can help-please get in touch.