“Today’s research from HMRC shows almost half (45%) the population are unaware of the tax implications around gifting. The conclusion of the report highlights that those who are gifting are doing so not to avoid taxes, as the inheritance tax rules are inconsequential to most, but to support their family members. While the report shows that just one eighth of the population were gifters in the prior two years to the survey, the economic shifts in the country suggest that number is going to dramatically increase in the coming years. The amount of wealth within the country continues to skew towards older generations who want to assist upcoming generations who are set to be less well-off and are struggling under the weight of increased living costs, sky rocketing property prices and chunky student loans.
“What the report doesn’t address is how that lack of knowledge can be immensely detrimental. Gifting during a lifetime has become a perverse game of Russian roulette thanks to potentially exempt transfers. Essentially people have to ask themselves: Do you think you’ll live longer than seven years? How much money are you willing to put on that bet?
“With the Office for Tax Simplification already taking a close look at inheritance tax, it’s interesting to see that HRMC is also doing some digging. One way to simplify things is to update the heavily outdated gifting allowance. The annual IHT gifting allowance has remained unchanged At £3,000 since 1981 and had the allowance been tracked to inflation, it would be permissible to gift £11,296 per tax year in 2018.
“This report adds credence to that proposal as it shows that people are not trying to dodge taxes when they are gifting. They are, in part, trying to ease the ever intensifying intergenerational conflict and help money flow to their loved ones that need it most.”