Christmas is not far away and we’re starting to think about what to give to our family as presents. Here are a few alternative, tax-friendly festive gift suggestions that will both delight them and help you to redistribute your money as you, and not the Chancellor, would wish:
• Utilise the “small gifts exemption”, whereby you can make an unlimited number of gifts of up to £250 to family and friends.
• Consider making gifts out of “surplus income”. These gifts, which are unlimited in amount, must be made on a regular basis (ie monthly, quarterly or annually) and should be of an amount that does not diminish your usual standard of living.
• Gift up to £3,000 a year (£6,000 per married couple) out of capital. If you did not use the gift last year, you can double up this year. However, the “carry forward” of unused gift relief is only available for 12 months from the previous 5 April.
• Consider writing any life insurance in trust for your children or grandchildren, otherwise the proceeds of the policy paid out when you die will be charged to inheritance tax (IHT). If this is done, the annual premiums will be treated as a gift to the beneficiary.
• If you own a private family firm that is treated as a trading company by HM Revenue & Customs, consider making a gift of some of the shares to the wider family. This may allow you to pay dividends to them in future, and the gift can be made free of any tax liabilities.
• You could make a gift into a discretionary trust for your grandchildren, perhaps to pay school fees or help with the purchase of a house later on. Under current legislation a gift into such a trust of up to the IHT exempt threshold of £325,000 per donor could be made without incurring a tax charge.
• Make a New Year’s resolution to review your will and look at IHT planning to benefit the whole of your family.
• If making a charitable donation, do so under the gift aid scheme. This allows the charity to reclaim tax equal to 25 per cent of the gift and, if you are a higher rate taxpayer, you can also claim back some relief.
• Ronnie Ludwig is a partner at Saffery Champness chartered accountants in Edinburgh
