Hi Dean,
The good news is that you can gift your children £3,000 each every year without any tax implications for either you or them. If you didn’t give them anything in the previous tax year, you can gift £6,000, as you can roll last year’s allowance over.
If you want to give them more, you absolutely can. The risk here, in terms of Inheritance Tax, is if you die within 7 years of providing that gift. If you do, then the money you give them is subject to IHT on a tapered scale – so, if you die one year after the gift, it’s a lot more IHT than if you die six years later.
While this may seem a concern, the way to look at it is this: even if they do have to pay IHT on the tapered scale (which we hope won’t be the case and that you’re in good health!), it will still be less than if you waited to leave them all the money in your will. So, gifting cash now can be a good way to reduce your inheritance tax bill.
The main thing to be cautious about, though, is if you think you’ll need state-funded assistance (such as a care home or home visits from carers) in the next few years. Or, if giving the money away means you won’t have much to live off and you’d need to claim state benefits. In both instances, giving your money away is seen as Deprivation of Capital – and could exclude you from making those claims. So, the main thing here, is to give away only what you can afford (even though it’s tempting to help children out as much as possible!).
I hope that helps 🙂
.
