While many of us may pop an extra £20 in cash or vouchers into a loved ones card, legal experts at Latimer Hinks suggest giving up to £6,000 this Christmas assuming you can afford to do so.
Latimer Hinks Director Elizabeth Armstrong says Christmas and New Year can be the ideal time to give a large cash gift that will help to off-set the financial pain of Inheritance Tax (IHT).
She said: "No one wants to think morbid thoughts at Christmas, but it can be a good time to think more positively about steps you can take to make sure your family and loved ones benefit as much as possible when the time comes to pass on your assets.
"You could hand over enough money this Christmas to help your children or grandchildren to put down a deposit on a home, to buy their first car after passing their driving test or to help towards the cost of university.
"On an entirely IHT free basis you can give away £3,000 per annum, or £6,000 if you have not used your £3,000 allowance in the previous tax year.
"In doing this, you reduce the size of your estate when the time comes to pay the so-called death tax.
Elizabeth said: "While the general rule of thumb is that you can give a lump sum of £3,000 per year along with giving regular cash gifts out of surplus income, its important to seek advice, particularly as there are some exceptions. For example if you give away your home but continue to live in it, it is likely to be treated for tax purposes as if the transfer had never taken place. You also have to survive for seven years following any cash gift over and above £3,000 per year to ensure no IHT is payable.
"Every case is different and what works for one individual or family may not work for another, but by taking the time to think about the future you could make sure you pass on more of your hard-earned cash and assets to whom you want, rather than the taxman.
Elizabeth Armstrong is Head of the Trust Department at Latimer Hinks Solicitors in Darlington. Latimer Hinks has a team of around 40 people serving private and corporate clients.
For further information: www.latimerhinks.co.uk or call 01325 341500.
Please note: This article is intended as guidance only and does not constitute advice, financial or otherwise.