My 89-year-old father would like to gift myself and my sister £3,000 each this financial year and says he can gift a further £3,000 each as he did not gift any amount the previous year. Is this the case and, if so, is there any way the transactions should be recorded?
Everyone has a £3,000 gift allowance a year. This is known as an annual exemption and means that you can give away assets or cash up to a total of £3,000 in a year without incurring inheritance tax.
Gifts that are worth more than the £3,000 allowance are subject to inheritance tax. The amount of tax to pay on these gifts depends on whether it was given within seven years before the person died. You can carry over any leftover allowance from one tax year to the next, up to a maximum of £6,000.
If you do this, you have to use up all your allowance in that tax year.
In other words, you can’t accumulate several years’ worth of allowance and use it up in a single large gift. Your father can, therefore, use up his annual exemption for the previous year and this year and give gifts totalling £6,000. The following year, his allowance will amount to £3,000.
Moneywise says: The Money Advice Service suggests making aa note of the gift, the date it was given and the account it was paid from, and this can be left with your father’s will.