HMRC launches new tool to work out if your gifts will be slapped with 40% inheritance tax | Personal Finance | Finance
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With just over a week to go until Christmas, Britons are being urged to do their sums so that they are not stung by a huge bill because of their generosity over the festive period. Now HMRC has launched guidance so that people can avoid giving all their hard-earned cash to the taxman.
It is the season of gifting but tax experts are worried that unless Britons know the rules, it could cost them a fortune.
HMRC has updated its guidance to help people avoid getting caught out if they plan on giving cash sums, property or assets to family members this year.
The good news is that not all gifts will incur a tax bill.
Gifts that are exempt from a 40 percent tax bill include assets passed to a spouse or civil partner, gifts to charities, and gifts that are made seven years before the person dies.
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How to avoid paying inheritance tax on gifts this year:
Check your list to see where the running total goes over the £325,000 threshold. People need to pay tax on:
- The part of any gift that took the running total over the threshold
- Any gifts made after the threshold
According to the latest figures, inheritance tax receipts for April to October 2021 were £600million higher than the same period in 2020.
Much of this is down to passing on property but people can still get caught out when it comes to smaller assets or gifts.
Although paying some inheritance tax is likely, clever planning can help Britons make the most of their money.
Brushing up on the rules could save Britons a fortune.
Meanwhile, grandparents can also help their children and grandchildren make the most of their gifts by advising on how to invest it.
Mr McCann recommends people put the money in lifetime or junior ISAs.
He said: “Toys will come and go but a Junior ISA could lead to something more lasting, like a house deposit, a university fund or money to enjoy a gap year.”
The tax expert also recommended making the most of stocks and share ISAs because these could be even more financially appealing.
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