Most people making gifts of money or assets are unaware of inheritance tax rules that might apply to them.
HMRC polled 2,090 people and found that only 25% of those who recently made a gift had a working knowledge of the rules.
Less than half (45%) were aware of the rules or exemptions surrounding inheritance tax when they made their largest gift.
Only 8% of gifters considered inheritance tax rules before making a gift, the research showed.
Inheritance tx will potentially apply on gifts where a donor dies within seven years of making the gift or on a chargeable lifetime transfer into a relevant trust or company.
Within these rules are exemptions, such as gifts to a spouse or civil partner, charity or a political party, while an annual exemption on gifts worth up to £3,000 applies.
Should the donor die within three years of making the gift, inheritance tax of 40% will apply if the estate is worth more than £325,000.
Gifts made between three and seven years before the donor’s death are taxed on a sliding scale known as taper relief.
Among gifters who were aware of the rules, 18% said they were influenced by them when they made their largest gift.
More than a quarter (28%) of gifters had sought advice from either GOV.UK or professional tax advisers.
Talk to us to understand the rules on gifts. Contact Sue Stephens.