Also, you can’t request gifts back.“If you are making a gift, you need to give it absolutely and not retain any benefit,” says Holland.
“If there is going to be an inheritance tax, and you want to retain a family home, you could look at an insurance policy to pay the cost,” he adds.“You might want to ask your children, if they’re beneficiaries, to pay the cost of the insurance rather than yourself.” He also suggests reviewing your will to make sure it “accurately reflects your assets”. Exley says you can consider making regular payments to loved ones too.“There is no limit to the value of regular payments you can make to another person, for example if you’re helping with their living costs,” she notes.“These are known as ‘normal expenditure out of income’, but it could include things like paying rent or a mortgage for your child, contributing to a savings account or Junior ISA for a child under 18 or providing financial support to an older relative, perhaps to help with care costs.”
What two potential changes are being proposed?
“One of the things the government has mooted over the summer is putting a cap on how much can be gifted, and that cap could be somewhere between £100,000 and £200,000,” says Holland. The second change the Government has talked about is removing the taper.“So if you died at any point during those seven years, the full 40% IHT would be chargeable on the value of that gift,” notes Holland.
What could this mean for individuals?
Don’t forget to live your life
“In the grand scheme of things, these two changes to the value of lifetime gifts would affect those on the high end of wealth.The everyday person wouldn’t be impacted by a lifetime cap on gifts,” reassures Holland. “However, if you couple these with some of the changes that are possibly coming into effect over the next two years, such as the treatment of pensions, and also, if you’re a business owner, it then might start to have an impact on more people.”
“The most important thing is looking after yourself, making sure you’ve got enough money and assets to do all of those things you wanted to do. I appreciate wanting to help family, but don’t compromise on your own retirement because you’re trying to beat a tax – life’s for living,” says Holland.“Enjoy your money.You’ve worked really hard for it. There is another exemption called the main residence nil rate band, which is a further £175,000 each for married couples,” adds Holland.“One of the conditions for having that extra allowance is the property has to be left to direct linear descendants, so children and grandchildren.”
What can you do to prepare?
Holland recommends looking at your finances and speaking to an independent advisor so you’re informed about your options and can decide “whether there’s any scope to use surplus assets to make gifts” earlier.
Photo: Reme Holland.
Photo: Claire Exley.
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