Martin Lewis has issued a warning to anyone gifting money, as it could trigger inheritance tax liabilities. Speaking on his podcast, available on BBC Sounds and Apple Music, he explained how financial support provided to children or grandchildren might be counted towards an estate if not properly managed.
Annual gift allowance explained
The main annual allowance permits individuals to give away up to £3,000 each tax year without it being added to their estate. Additionally, gifts made more than seven years before death are typically exempt from inheritance tax. Lewis emphasised that the £3,000 does not need to be given to a single person, allowing flexibility in distribution.
Expert insights on gifting rules
Lucie Spencer, partner at Evelyn Partners, clarified: "There's the large gift allowance, which is £3,000 per individual per tax year. If you haven't given that £3,000 in the last tax year, you can effectively give £6,000 today." Parents can also gift up to £5,000 to a child getting married, enabling four parents to collectively gift £20,000. Grandparents can give £2,500, while others can give £1,000 for wedding gifts.
Record-keeping recommendations
Spencer added: "When someone passes away and you come to complete their inheritance tax form, there's actually a whole list where you have to detail all of the gifts which you've made leading up to your death." Experts advise keeping a written or digital record of all gifts, in addition to a will, to ensure compliance and avoid unexpected tax burdens.
For further updates, join the BirminghamLive WhatsApp community or sign up for the Money Saving Newsletter, which provides daily information on cost-of-living issues, including DWP and HMRC changes, benefits, payments, and shopping discounts.
