Gifts are split into those with immediate effect and those that you must survive for 7 years before they leave your estate.

Gifts that fall immediately outside your estate

• £3,000.00 can only be gifted to one individual
• £250.00 can be gifted to any number individuals in any tax year.
• Surplus income – If your taxable income exceeds your expenditure then you can gift the surplus, so long as it does not reduce your standard of living.
• Gifting can also be made to charities in your will or before. These gifts fall immediately outside your estate so that no inheritance tax is due.
  

Gifts that work after 7 years.

• All gifts in excess of the immediate effect gifts listed above are treated as potentially exempt transfers. This means that for the seven years after giving they are still counted as part of your estate. Only if the gift is in excess of the nil rate band, currently £300,000, can you claim taper relief in years 4 to 7 to reduce the size of the gift for inheritance tax calculation. After 7 years all potentially exempt transfers are outside your estate for inheritance tax calculations.
  

To contact Alexander Calder about gifting for inheritance tax planning, click here.