Beware your gifts don’t present you with a tax liability

Are you thinking about gifting large sums or assets to your family during the festive season? HMRC may also look to take a bite out of your generosity, so how can you mitigate tax and make sure you and your recipients aren’t landed with a tax liability? We look at the tax implications of gifting, including inheritance tax and capital gains tax.

Inheritance tax

If you’re thinking about gifting large sums of cash or high-value assets, inheritance tax is something to be wary of. If you’re gifting to an individual, there’s no inheritance tax to pay, but there could be knock-on effects in the future which may leave the person receiving the gift with a liability to HMRC.

There are exemptions for small gifts to the value of up to £250 per recipient per tax year. For slightly larger gifts, you'll also have a £3,000 total annual exemption for the year to come off gifts exceeding that value.

Capital gains tax

Something not always thought about are capital gains tax implications on gifts. Where a gift of an asset other than cash is made, capital gains tax could be payable.

Gifts of assets to close family members will be treated as having effectively been sold for market value, so if you gift something which has increased in value since you acquired it, you may well have to pay capital gains tax. In particular, large value gifts, such as a gift of a property, could lead to a very costly tax bill.

Other taxes

Other taxes could be at play when making gifts. For example, if you transfer some shares or a property to someone, and they give you some money for it (even if at much less than market value) there may be stamp duty or stamp duty land tax to pay.

You should seek advice before making any significant gifts to make sure you’re fully aware of the implications. There may be some tax planning opportunities that could be taken before the gift is made. So please get in touch, we will be happy to help.

Need help?

To find out more, please get in touch with your usual contact, call 0330 024 0888 or email enquiry@larking-gowen.co.uk.

Emma Walker