children you may have to pay full market rent. Also,
they could be liable to pay capital gains tax on it if it is a second
property for them.
However, within certain guidelines you can give away some assets and
gifts to friends and relatives, known as ‘potentially exempt
transfers’. These will not be subject to inheritance tax as long as
they are given at least seven years before you die. If you die within
seven years of giving a gift, tax will have to be paid on a sliding
scale.
Some gifts are completely exempt from the inheritance tax rules. You
can gift up to £3,000 in any tax year, plus up to £3,000 in
unused allowance from the previous year. Unused allowance can only be
carried forward from one previous year. There’s also an allowance for
wedding gifts to children (up to £5,000 for each child) and
grandchildren (up to £2,500 per grandchild) and other friends and
relatives (up to £1,000). A small gift allowance of £250
per recipient per year is also permitted.
Some gifts, however, may be subject to capital gains tax if any income
is made from them, e.g. if they are invested in stocks and shares.
Gifts to charities
Gifts to registered charities and political parties are always exempt
from inheritance tax.
Trust funds
In some circumstances, it’s possible to set up a trust fund. However,
the rules regarding trust funds were changed in the 2006 budget to
restrict inheritance tax avoidance in this way so it’s not always a
feasible option. Most money held in trust for children will be subject to inheritance tax after
they reach 18 unless they are disabled.
Life policies
Certain types of life policy are exempt from your estate under
inheritance tax rules. So, it may be possible to pay regular sums into
such a policy, either towards a trust or towards your children, in the
hope that it will make enough money to pay some or all
of the inheritance tax bill at the same time as reducing the size of
your taxable estate.
Article Source: http://www.upublish.info
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About the Author:
Benedict Rohan
Author: Benedict Rohan
Website: www.mortgagenation.co.uk
Benedict Rohan works as a freelance finance writer. Commercial Mortgage, Homeowner Loans, Remortgages.
