Rachel Reeves is reportedly mulling an inheritance tax raid which critics have said threatens to « turn grandparents into tax evaders ». Currently, you can give away £3,000 worth of gifts each tax year without them being added to the value of your estate under what is known as an annual exemption.
But reports in recent weeks suggest the Chancellor may tighten the rules in a crackdown on the value of financial gifts people can make to their loved ones during their lives. A cap on lifetime gifting which would limit further the amount which can be given away free of inheritance tax is reportedly being considered by Ms Reeves.
Reports of what the Chancellor might announce on gifting in her second Budget on November 26 has prompted criticism from some financial experts.
Scott Gallacher, Director at Leicester-based Rowley Turton, said: « I can’t believe the Chancellor would be daft enough to cap family gifts.
« All it would achieve is turning grandparents into overnight tax evaders, with cash gifts to children and grandchildren rocketing to avoid what many already see as an unfair tax. »
Fellow finance expert Benjamin Beck told the Birmingham Mail: « Family gifts can be the difference between affording a deposit, keeping up with bills, or accessing good education.
« Tightening the allowance risks cutting off this support at the very moment it is needed most. »
Anita Wright, a chartered financial planner at Ribble Wealth, said any move to clamp down on gifts risks hitting families at the very moment when inter-generational support is most vital.
She advised: « The key is to plan early and make use of existing allowances before they disappear.
« Beyond that, trusts, insurance and structured succession planning will be essential. »
Gifting is widely recognised as an efficient way of passing wealth to loved ones and lowering the value of your estate to reduce your IHT bill.
Lifetime gifts are exempt from IHT if they are within the annual allowance of £3,000 or small gift allowance of £250 per year.
