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TWP reminds public to be wary of inheritance tax pitfalls surrounding gift-giving

Leading Surrey accountancy firm TWP has called on individuals to be mindful of inheritance tax (IHT) when giving gifts from their Estate.

While IHT is generally associated with the taxation of an individual’s property, money, and possessions post their demise, its implications on gifts provided by the deceased prior to their death are equally essential.

TWP stress the importance of the ‘seven-year rule’ when factoring in IHT on gifts given. This rule dictates that no tax is required on a gift if more than seven years have passed since the gift and the donor’s death.

TWP were keen to add that if this period is less than seven years, IHT becomes applicable on a taper relief basis, gradually decreasing over the years until it reaches zero after seven years.

While IHT due on gifts is typically handled by the Estate, if the value of the gifts surpasses £325,000 within seven years of the giver’s death, the gift recipient becomes responsible for the IHT payment.

According to the GOV.UK website, liable gifts under IHT include money, personal and household goods like furniture, jewellery, or antiques, a house, land, buildings, and certain stocks and shares.

“The rules surrounding inheritance tax can be daunting,” said Emma Croft, Private Client Tax Manager at TWP.

“While many focus on the inheritance tax on properties, individuals should be mindful of this when giving or receiving gifts.

“The seven-year rule should also be considered, as this will have a major effect on if tax is paid on gifts or not.

“It is also important to know that some gifts are exempt from inheritance tax, such as gifts between spouses and civil partners and those given for birthdays or Christmas out of your regular income, as well as donations to charities, political parties, and housing associations.”

The seasoned team at TWP has extensive experience in the field of IHT and is equipped to provide necessary advice and support. For more information, please click here.