Gift Allowances for Inheritance Tax Planning: Agriculture

As we all come to terms with the announcements made in the Autumn Budget, here are some simple Inheritance Tax planning tips to consider. Firstly, anyone can benefit from gift allowances.

Those farmers fortunate enough to have cash can give some away to reduce their estate as follows:

• £3,000 Annual Exemption

This can be £3,000 to one person or split between many people. If not used in one year it can be rolled forward to the next year, but only for one year.

• £250 Small Gift Allowance

  Small gifts of up to £250 per person to as many people as you like provided you have not used any other allowance with the same person.

• Gifts for Weddings/Civil Partnerships

  Of £5,000 to a child, £2,500 to any grandchildren/great-grandchildren, or £1,000 to anyone else. You can combine this allowance with your annual exemption, but not the small gift allowance.

Another appealing allowance is normal expenditure out of excess income. What makes this relief particularly interesting is that there is no limit on the exemption, provided the donor has sufficient income to both sustain their current standard of living and make the regular payments. This is often used for school fees or living accommodation for university, but it could simply be paying for a grandchild’s monthly or annual car insurance.

It is important to understand the allowance in full however. Income doesn’t remain income indefinitely. At some point it changes to capital. There is no set rule to this, but HMRC generally accept that excess income (net of taxes) of one year could be used for a gift in the next year. There must also be the intention of regular payments. It doesn’t have to be monthly, quarterly or annually but there needs to be a clear intention of a regular pattern.

Of course, with all of the above, it is imperative that all gifts are well documented so that when it comes to calculating someone’s estate everyone knows which gifts have been made and when.

Get In Touch

For more information or advice on Gift Allowances for Inheritance Tax Planning, contact your local Whitings office or your usual Whitings contact.