Give away more before you die
One misconception about inheritance tax planning is the belief that the £3,000 annual exemption is the most you can give away in one year. In fact, there's no limit - you just have to live for seven more years.
One misconception about inheritance tax (IHT) planning is the belief that the £3,000 IHT annual exemption is the most you can give away in one year. In fact, there's no limit, says The Schmidt Report. "You just have to survive seven years after doing so." So in theory you could give away millions, and as long as you then live seven years, these "potentially exempt transfers" become "actually exempt".
So what's the point of the £3,000 annual exemption? It means that if you die tomorrow you'll still have saved your heirs some inheritance tax. If you haven't used your exemption in the previous tax year, this can be brought forward (a married couple in this situation could give away £12,000 without incurring a tax liability). Don't forget about 'regular gifts out of income' "possibly the most under-used device by high-income earning individuals", says Finance Daily. Provided the donor can show the gifts are habitual, made from post-tax income, and don't reduce their standard of living, they can give away as much as they like tax-free.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
MoneyWeek is written by a team of experienced and award-winning journalists, plus expert columnists. As well as daily digital news and features, MoneyWeek also publishes a weekly magazine, covering investing and personal finance. From share tips, pensions, gold to practical investment tips - we provide a round-up to help you make money and keep it.
-
Is property investment still as safe as houses? Why golden era could be over
The golden era of property is over and investors are better off in the stock market, new research suggests
-
What Santander’s takeover of TSB means for customers
Santander is set to buy rival TSB for £2.65 billion. What does it mean for customers, and could we see the TSB brand disappear from the high street?