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  • Writer's pictureEmma Aslett

Wills & Probate | Giving a Gift During Your Lifetime

Updated: Jul 31, 2023

When you make an outright gift to a person during your lifetime, there is no inheritance tax (IHT) to pay.


However, it may be a potentially exempt transfer (PET) unless a valid exemption applies. For example, gifts to spouses and using the annual exemption of £3,000.


Any gifts made more than 7 years prior to your death are exempt and will not be included in the value of your estate.


BUT…


Any PETs made within 7 years of death will be considered part of your estate. Unless they fall within your nil rate band (the current initial threshold is £325,000) or are covered by a different exemption, the beneficiary of the gift becomes liable for IHT.


If you did make a gift within the 7 years prior to your death, the rate of IHT reduces over a period. This is known as taper relief.


If you made a gift within:

  • Less than 3 years, you will pay 40% tax

  • 3 to 4 years, you will pay 32% tax

  • 4 to 5 years, you will pay 24% tax

  • 5 to 6 years, you will pay 16% tax

  • 6 to 7 years, you will pay 8% tax

  • 7 or more, you will pay no tax


There are ways in which you can protect your estate but it is important to take advice.


There are many people who believe that you can simply transfer money to person XYZ but, trust me, that will not get you away from the tax man…


Please contact me to clarify any of the above and for assistance with your issue.


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0207 183 4595


The information provided in this article is not intended to constitute professional advice and you should take full and comprehensive legal, accountancy or financial advice as appropriate on your individual circumstances by a fully qualified Solicitor, Accountant or Financial Advisor/Mortgage Broker before you embark on any course of action

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