15th June 2017
Jonathan Watts-Lay, Director, WEALTH at work, speaks to People’s Friend magazine.
Q: I’d like to be able to give my grandchild a monthly income. Are there any tax issues I need to be aware of?
A: There are several allowances which allow you to ‘gift’ money to your grandchild without the threat of Inheritance Tax (IHT).
Firstly, you are entitled to an annual gifting allowance of £3,000 each tax year (e.g. £250 per month), without any tax implications after death. It’s worth noting that this allowance can be carried forward for one year if not used.
Also ‘regular payments’ made to your grandchild are excluded from IHT liability, providing they come from your income (not your savings) and don’t affect your standard of living.
Finally, there is a seven year rule which means that any gifts not covered by these exemptions, which are given more than seven years before your death, are automatically exempt from IHT. However, gifts given less than seven years before death will be added to the value of your estate and could be liable for IHT.
It’s a complex subject so it’s best to speak to a financial Adviser if you are considering using these allowances.
WEALTH at work is a leading provider of financial education, guidance and advice in the workplace. This service helps employees make informed decisions to improve their financial wellbeing throughout their career and to maximise income at-retirement. www.wealthatwork.co.uk.