Ask the Experts: Can I gift £10,000 tax-free to my niece for her first home?

Question

I have £10,000 that I would like to give to my niece to help her buy her first home. However, I don’t want to burden her with inheritance tax if I die in the next few years. Is there any way I can give her the money without paying tax? Does the fact my partner and I are getting married this year make any difference? I read something that made me think that means I can give her £12,000 without having to worry about tax.

From:
AH/Rotherham

Answer

You can give away £3,000 worth of gifts every tax year without them being added to the value of your estate and subject to inheritance tax (IHT).

You can also carry over any unused allowance from the previous tax year. This means that you can give away £6,000 to your niece tax free, provided you don’t make any other gifts.

You could get your partner to make up the balance of the gift to your niece too and use their £3,000 annual allowance. They too could carry over their allowance from last year if they didn’t use it. This would mean that provided you both make the gift, you can give away up to £12,000 to your niece free of IHT.

If you make the entire gift without your partner’s help, then £4,000 would be subject to IHT at up to 40% if you survive less than seven years between the date of the gift and the date of death.

The amount of IHT due will decrease the longer you live after making the gift until it falls to zero after seven years.

This article was written in response to a reader’s question. If you have a financial or work/career question that has left you scratching your head ask our panel of experts who will aim to shine some light on the matter.

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Published: 15 June 2017
Last updated: 15 June 2017