Lifetime & Tax Free Credits

A lifetime gift is made during a person’s lifetime rather than on death. There are a number of reasons for making a lifetime gift – for example, you may wish to help a child with their first property or assist a loved one with care home fees.

Lifetime Gifts & Inheritance Tax Rules
Lifetime gifts to spouses or civil partners are free from inheritance tax.

A gift that is made ‘absolutely’ (i.e. without any strings attached) to anyone other than a Spouse or Civil Partner, will not be included in a person’s Estate if they survive for 7 years from the date of making that gift. 

If the person making the gift dies within that 7 year period, the position changes and Inheritance Tax will be charged, but at a reduced percentage.

Gifts to charities or political parties
Gifts to Charities or Political Parties are exempt from inheritance tax, both during a person’s lifetime, and on their death.

Business and Agricultural Property Relief
Gifts of business property or agricultural property may attract Relief at either 50% or 100% depending upon compliance with special conditions and the rules of the Revenue at that time.

Lifetime Gifts & Restrictions
As a Lifetime Gift must be made ‘without reservation’, the donor can take no future benefit from that gift.  For example, if the gift is of a property, the donor can’t live in, benefit from income of, or take holidays in that property. 

If the gift is a sum of money, the donor must not retain any income from that gifted sum.

Exemptions from 7 year rule
Certain lifetime gifts are exempt from the 7 year rule however these exemptions are subject to change depending on tax year or the value of the gift itself:

• Your annual gift allowance of £3,000. 
• Annual small gifts a maximum of £250 can be made to as many beneficiaries as you wish. 
• Marriage gifts.  Each parent may gift £5,000 when their child marries.  Each Grandparent may gift £2,500 and other individuals may gift £1.000.
• Regular gifts from income provided this does not reduce your expendable income to a level adversely affecting your standard of living (useful for those with large Pensions)

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