If you give away money and other assets with the view of saving inheritance tax you need to be aware of the rules - otherwise it may all be in vain.

When you pass away, your estate is counted as including anything that you gave away in the last 7 years of your life, but with some elements omitted:-

• £250 - you can give up to a total of £250 within any one year, to any number of individuals without it counting towards your estate. But be clear - if you give someone £200 for their birthday and £200 for Christmas, then their individual total is £400 and so it may count towards your estate.
• £3,000 - where an individual receives more than £250 from you in a year, you can give up to an overall total of £3,000 within the year without it counting towards your estate. So, a gift of £1,000 to each of two children would not be counted, but a gift of £2,000 to each of two children totals £4,000 and will count towards your estate.
• There are special rules on marriage - you can give up to £5,000 as a marriage gift to your child, and up to £2,500 if it is your grandchild, or up to £1,000 to anyone else - beyond these limits the gift will count towards your annual limit and beyond would be caught in the 7 year count-back.

Each member of a couple has their own limits, so together you could be giving away £6,000 per year. If you do not fully use a limit in a given year it can be rolled forward, but only to the next year and no further. There is nothing to stop you giving more than these limits - it is just that if you die within 7 years the gift will count for tax purposes. However, for very large gifts there is a tapering of the tax payable after year-3 up to year-7. If the gifts are caught by this 7-year rule, even if they are not large enough to generate a tax bill in their own right, they would use up some of the available tax free allowance (the Nil Rate Band) and thereby reduce the amount of unused NRB that could be transferred to your widow(er).

By the way, these limits have NOTHING to do with avoiding paying Long Term Care Fees - that is, there is no limit below which the authorities have to consider that gifts are not deliberate Deprivation of Assets.

When making a gift it has to be genuine e.g. if you give your house to your children but continue to live in it rent-free then tax issues such as Pre-Owned Asset Tax (POAT) and Gift with Rerservation of Benefit (GROB) will apply.

Is it a good idea to be giving money away like this? Probably not. Are there better ways to do it if you wish to avoid inheritance tax? Almost certainly - including of course making an appropriate Inheritance Tax Will, so get in touch to receive advice specific to your situation.