What's the best way to gift my daughters £3,000? Can I split it between them?

Mike Gordon
15 May 2017

Q

I know that I am allowed to gift £3,000 each tax year without it being liable for inheritance tax (IHT). I have three daughters and I would like to know how I go about splitting the money. Do I have to gift all £3,000 to one of them inone go or may I give each of them£1,000 in the same tax year?

From
JB/Broadstairs

A

You can either give one daughter the full £3,000 or split it between the three of them. Plus if you made no gifts in the previous tax year, you can carry forward this unused allowance, but only from the last year. So you could give your daughters £6,000in total this tax year.

 

If you were to gift £3,000 to one of them and perhaps rotate between them each tax year, you can also gift £250 each to your other two daughters, as long as another IHT exemption is not used on them. For example, if one of them is getting married you can give them an extra £5,000 exempt from IHT.

Alternatively, normal gifts out of your income – for example, for Christmas or birthday presents – are exempt, but you must be able to maintain your standard of living after making the gift. If any of your daughters are under 18, payments towards helping their living costs are also exempt.

 

Any additional money you give them will be subject to the seven year rule for IHT. In basic terms, gifts made earlier than seven years from death are not counted as a chargeable transfer and are exempt from your estate. If there is IHT to pay on your estate, it is charged at 40% on gifts made in the three years before you die. Gifts made three to seven years before your death are taxed on a sliding scale ranging from 32% to 8%.