Inheritance tax gift rules ‘incredibly outdated!’ – Sunak urged to act amid ‘gifting gap’

Inheritance tax labelled ‘unfair’ and ‘cruel’ by expert

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Chancellor Rishi Sunak has been urged by finance experts to introduce a temporary ‘gifting amnesty’ where the gifting allowance for inheritance tax is increased from £3,000 to £10,000 for the next two years. The financial advisory firm Quilter states that this would encourage older generations to pass on their wealth to their children and grandchildren without worrying about tax repercussions. The current annual gift allowance is the simplest allowance and provides each individual with £3,000 a year to give away. This however has remained unchanged since 1981 and according to the Bank of England’s inflation calculator, the rate would sit at £9,339.52 now if it rose with inflation.

Research from Quilter found that older generations have become increasingly worried about their children and grandchildren’s financial futures.

Almost two-thirds of adults surveyed were “not confident” that future generations would be able to get onto the housing ladder. More than a third were worried that their grandchildren could not afford to go to university.

Quilter states that the concern for finance is greater for the younger generation, as they are to face a “triple whammy” of tax hikes.

This is due to the student loan repayment threshold freeze, the hike in National Insurance contributions (NICs) and the frozen tax thresholds and personal allowances.

Rising life expectancy could also mean that younger people may not receive financial help from older relatives until much later in life despite likely needing it sooner.

Shaun Moore, tax and financial planning expert at Quilter said: “The current gifting exemption is incredibly outdated and therefore should be adjusted to reflect our current circumstances to help younger generations, even if only for a short period.

Mr Moore stated that as well as encouraging more people to take advantage of gifting, it would also help raise awareness of the exemption as many baby boomers hold onto their wealth and give it away when they die.

Mr Moore added: “At present, there is a clear gifting gap between those who could afford to make lifetime gifts, versus those who actually consider doing so.

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“While many people may believe they are doing the right thing by holding off on passing on their wealth via a big one-off lump sum until after their death, it may be a good idea to consider the ways in which you can support your family now and also reduce the burden of inheritance tax.”

Currently, inheritance tax is paid at 40 percent on the estate of someone that has died if it is above the nil rate band of £325,000.

Gifting enables a person to give away what would have been part of their estate tax-free.

The current £3,000 allowance can be split between multiple people, even if they die within seven years of making the gifts, and part of the exemption can carry forward into the next tax year.

Britons are also allowed to give as many gifts up to the value of £250 to as many people as they wish. However, it cannot be gifted to someone who has received another gift under their annual allowance.

People can also give tax-free Wedding Gifts depending on the person’s relationship with the newlyweds

For a child, a person can gift up to £5,000; for a grandchild or great-grandchild, it can be up to £2,500. Any other relative or friend a person can give up to £1,000 without facing any tax repercussions.

Under the current rules, a person is allowed to give money to an ex-spouse, an elderly dependent or a child under 18 years or in full-time education if they are helping with their cost of living.

Quilter suggests that if a person wants to help their grown-up children with the current cost of living crisis then they can start to make regular monthly payments now which would fall under “normal expenditure out of income”.

Mr Moore added: “Lifetime gifting is an important aspect of inheritance tax planning, and it allows you to have more control over where your money ends up.

“As such, it can be a great way to make the most of your financial assets while also getting to enjoy seeing your savings help your family prosper.” has contacted HM Treasury for comment.

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