When planning your estate, making gifts can be an effective way to minimise the Inheritance Tax (IHT) burden on your assets.

By using the seven-year gift rule and planning carefully, you can ensure that more of your wealth is passed on to your loved ones, rather than the taxman.

The seven-year rule explained

Gifts made more than seven years before your death are exempt from IHT.

This provides an excellent opportunity to reduce your taxable estate while helping the next generation.

However, gifts made within seven years of your death may still be liable for IHT.

If the gift was made between three and seven years before death, the gift is set against the nil rate band and sums above the limit taxable on the beneficiary.

However, the tax payable reduces on a sliding scale depending on the length of the gift, known as taper relief.

The importance of structuring gifts

Making gifts helps you save on taxes while also providing for your family’s future.

Gifts can help with life’s major milestones, such as contributing to education costs or a deposit for a first home.

However, to ensure the process runs smoothly, you should properly structure and document your gifts.

This involves recording key details such as the date, value, and recipient of each gift.

Proper documentation ensures compliance with tax rules and also helps avoid disputes among family members.

Complying with tax laws

For a gift to be legally valid and tax-efficient, it must meet specific criteria under UK tax law. For example:

• Cash gifts – Keep records of the amount and recipient
• Property or other assets – Transfers must be correctly documented and registered, particularly for real estate.

Failing to comply with these rules could result in gifts being included in your taxable estate, potentially leading to unexpected tax bills.

We are here to guide you through incorporating gifts into your estate plan.

We will help you manage the tax rules, structure your gifts effectively, and document everything correctly to give you peace of mind.

If you are considering making gifts or need advice on estate planning and probate, contact our team today.