IHT implications: wedding gifts

It’s fairly normal to give the happy couple a gift on their wedding day. Over time, the need for gifts to set up home are no longer the popular choice for gift-giving wedding guests. Instead, cash is seen as a sensible gift that gives the newly married couple flexibility to use the funds as they wish, whether for honeymoon or other expenses related to starting married life. However, many don’t consider the potential Inheritance Tax (IHT) implications when making a gift.

Generally, a gift made by any individual to a recipient will fall within the Potentially Exempt Transfer (PET) rules, meaning, if the person making the gift dies within seven years of the gift, the value of the gift is still included in their death Estate.

Exemptions

However, there are special rules for gifts made to those entering marriage or a civil partnership, which mean the individual making the gift can gift certain amounts without IHT implications.

Every individual has an IHT annual exemption of £3,000 and potentially has the prior year’s tax exemption too, if not already used. This annual exemption can be used on top of the following marriage gift exemptions:

• £5,000 to a child,
• £2,500 to a grandchild or great-grandchild, and
• £1,000 to any other person.

Cash gifts more than the marriage gift and annual exemptions will fall under PET rules. Records of these amounts should be kept in case they are required on your death.

Gifting as a parent

Parents wishing to gift money to a child and their spouse-to-be in recognition of their wedding could make a combined cash gift of up to £24,000 with no IHT exposure.

This is comprised of:

The gift must be made ‘in consideration of marriage’ so before the marriage takes place, and not after.

Alternative gifts

If you don’t want to give cash, but there’s something else you might want to gift, perhaps a property or another asset, the giving of non-cash assets may also have Capital Gains Tax (CGT) implications. The gift of a non-cash asset will usually trigger a deemed disposal at market value on which a CGT liability may arise and tax reporting may be required.

If you’re gifting something other than cash, you need to think through the implications of that gift, and if there’s any reliefs available to mitigate your exposure to tax. We can help you with this.

Thinking about giving an asset or cash gift?

Seek advice from one of our experienced tax team members who can provide guidance and advice on all tax matters.

Contact [email protected], Tax Director at Wilson Partners, who specialises in Private Client Tax, advising on Income Tax, Capital Gains Tax, Stamp Duty Land Tax and Inheritance Tax.