It is that time of year when thoughts turn to giving rather than receiving. With this in mind, I propose considering some very useful gift exemptions. Basically inheritance tax is a charge on value transferred. There are however a number of transfers which are totally exempt. The policy lying behind such gifts are the encouragement of philanthropy and avoidance of unnecessary administration.

The exemptions can be summarised as follows:-

• The annual exemption. An individual may make gifts totalling in any one tax year £3,000.


• Small gifts. Gifts of up to £250 can be made to any one person in any year provided the recipient is not a donee of the annual exemption.


• Gifts forming normal expenditure out of income. Provided these are totally out of income and no resort is made to capital for payment of other outgoings then the amount of this gift is unlimited. There is no need to survive for seven years, but appropriate paperwork is a necessity.


• Potentially exempt transfers. These gifts which can be of unlimited value will escape tax completely if the donor survives seven years.


• Charity gifts. This is an unlimited exemption.

It is recommended that proper legal advice is obtained before utilising any of the above exemptions to ensure that no challenge can be made.

Finally, I take this opportunity on behalf of my firm to wish you all a very happy and peaceful Christmas and New Year.

If you require any further advice or assistance please contact Warren Hawkings or a member of the Wills, Probate, Tax and Trusts team at Wortley Byers on 01277 268345 or whawkings@wortleybyers.co.uk.

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