Making regular tax free gifts is one of the best ways to avoid paying inheritance tax (IHT) as you pass on your wealth to your family and others. All the gifts you make to individuals will be free of IHT if you live for seven years after the day you made the gift. However, there are allowances that you can use to ensure your gifts will be free of IHT irrespective of what happens afterwards.

Every tax year you can give up to £3,000 free of IHT, either to one person or split between several individuals. If you did not use all this allowance in the tax year to 5 April 2006 you can roll forward the unused amount and set it against gifts made up to 5 April 2007. However, the roll forward stops at one year so the 2005/06 allowance cannot to be set against gifts made in 2007/08.

When there is a wedding in the family you can give an additional IHT free amount of up to £1,000 to the bride or groom. If you are a grandparent or parent to one them, your tax free gift may be increased to £2,500 or £5,000 respectively.

These gifts are all capital gifts which mean they reduce the level of your savings. If you have enough spare income to cover regular gifts those amounts will also be free of IHT. You need to set up a pattern of giving, such as regular premiums to a life policy or a standing order to the individual, and check that your income is sufficient to cover the regular gifts as well as leaving you enough to pay your own living expenses. We can help you work this out, so come and talk to us.