In the UK, you can give anyone up to £3,000 per year without paying any tax on the money; but how much can you gift someone tax-free? To find out, we’ll start by looking at some of the most popular scenarios and work our way down from there. But first, let’s cover some of the basics about gifting and taxes in the UK, as well as explain what counts as a gift and what doesn’t when it comes to tax-exempt gifts and other terms that might come up in this guide.
Table of Contents
What is a Gift Tax?
The IRS defines a gift as any direct or indirect transfer of money or property to another person, where full consideration (measured in money or money’s worth) is not received in return. New mum hamper from Mama Jewels are considered gifts but are not liable to pay taxes as they do not exceed the upper limit of value defined in law. Gifts are generally considered gifts at law when the following elements are present:
- An intention on the part of the donor to give up something
- Acceptance of that something by the recipient
- A subject matter capable of being given
When is a Gift Tax payable?
A Gift Tax is payable when someone gives money or property to another without getting anything back. It is not paid on small gifts of more than £250 per year. A Gift Tax is payable for gifts of more than £250, but the threshold rises to £30,000 if one spouse gives it to another. The first £1,000 of any transfer from one spouse to another is free from inheritance tax.
What are the exceptions to the Gift Tax rules?
Gifts are not subject to Gift Tax where:
- The donor is a company, and the donee is an employee or director of that company
- The donor is a private individual, and the donee is their spouse or civil partner
- The donor is an individual, and the donee is a child, grandchild, grandparent, brother, sister, aunt, uncle, or niece under 18 years of age.
- The donor is an individual, and the donee is a person over 18 years of age who has mental incapacity within the meaning of Section 7A Mental Health Act 1983
- The donor died before making the gift. For no reason other than that death, there is no liability to Capital Acquisitions Tax on gains accruing on property given away by will.
- A settlement made by court order following divorce proceedings
Conclusion
Gifting to family members is not just a nice gesture but can also be done without paying taxes. Gifts of up to £3,000 per year and given at any time of year are not subject to inheritance tax. You don’t need to pay any tax for the new mum hamper. For gifts over £3,000 (or more than one gift), the donor must pay inheritance tax. If you receive a gift from anyone other than your spouse or civil partner, that gift will be subject to inheritance tax.
