Inheritance tax is a 40% levy applied to the total value of assets left behind when you pass away, according to major media reports. Upon death, individuals can typically transfer up to £325,000 (the nil-rate band) without inheritance tax, increasing to £500,000 when bequeathing a primary residence to descendants. A married couple can bequeath up to £1 million tax-free, comprising two £325,000 tax-free allowances and two £175,000 main residence allowances, provided they are legally wed. Unlimited wealth can be transferred to a spouse or civil partner, or charitable organisation, entirely exempt from Inheritance Tax (IHT), with unused allowances being transferable.
Gifts provided seven years or more prior to death are not liable for inheritance tax, according to major media reports. The large gift allowance is £3,000 per individual per tax year, and can be given to one person or split between multiple people, Lucie Spencer, a specialist from Evelyn Partners, said. If you haven't used the £3,000 allowance in the last tax year, you can effectively give £6,000 today, Spencer added. Martin Lewis, the money-saving expert, noted during the press conference: "There's a £3,000 rule isn't there?" He also explained that the £3,000 allowance is separate from the seven-year rule and the gifts from income rule.
There's a £3,000 rule isn't there?
You can gift any sum from your regular income, provided it doesn't impact your standard of living, according to major media reports. You can separately make any number of gifts up to £250 to different individuals. You can gift up to £5,000 to a child getting married, £2,500 to a grandchild or great-grandchild, or £1,000 to any other person on such an occasion. The marriage gift allowance can be combined with the standard £3,000 annual allowance. Spencer recommends writing down all gifts on a piece of paper or spreadsheet and holding it with your will. "I recommend with all gifts and that's the small gift allowance of the £250, the large gift allowance of the £3,000 or any gifts are written down on a piece of paper or a spreadsheet and held with your will because when someone passes away and you come to complete their inheritance tax form there's actually a whole list where you have to detail all of the gifts which you've made leading up to your death," she said.
Junior ISAs are not protected from inheritance tax, Martin Lewis said. Gifting money to a child for a junior ISA is subject to the same seven-year rule as any other gift. "The tax-free element of junior ISAs is all about the income - on savings that's interest, on shares that's dividend and the capital gains on any growth. It is not a protection from inheritance tax," Lewis said. He added: "There are no special rules. If you're giving a child money to go in a junior ISA, you have the same seven-year rule that you have from gifting money in any other way. Although there are lots of different gift allowances, and you can give money from income."
So this is so people understand. This is outside of the 7-year rule. Outside of the giving money from surplus income rule. You, as an individual, can give up to £3,000 per tax year without paying inheritance tax. How do you denote that you're using this large gift allowance? Do you have to note down that's what your intention was or is it just back count?
The tax-free element of junior ISAs is all about the income - on savings that's interest, on shares that's dividend and the capital gains on any growth. It is not a protection from inheritance tax.
There are no special rules. If you're giving a child money to go in a junior ISA, you have the same seven-year rule that you have from gifting money in any other way. Although there are lots of different gift allowances, and you can give money from income.