Making careful use of gifts during your lifetime can be an effective way to mitigate the effects of inheritance tax.

Inheritance tax can reduce the value of even modest estates and hit larger estates even harder. In light of this, it can make sense to mitigate its effects by gifting assets to your beneficiaries during your lifetime.

As with most areas of taxation, it’s essential to take expert advice before you decide to use this option. We can help you get a good idea of the gifting options that suit your circumstances and guide you through the process of putting them into practice.

There are a variety of options that may be available to you. For instance, there’s currently an annual gifting exemption of £3,000 – a valuable and easily accessed option for many. It’s also possible to use your income to contribute to a life policy held in trust*. If you meet specific criteria, this could also be exempt.

It’s also the case that parents can gift up to £5,000 to each member of a civil partnership or marriage, and in some circumstances, lifetime gifts of capital intended to maintain a dependent can also be exempt.

Other examples of potential exemptions include gifts to charities, donations to political parties, or gifts to universities, national museums, and other institutions that exist for the public good.

Please note that this information is based on our understanding of existing law and HMRC practice, both of which could change in the future.

*Trusts are not regulated by the Financial Conduct Authority