Rob Cope of Remember a Charity, a non-profit organisation, said gifts in wills enabled people to make “a considerable difference” and support good causes while saving themselves from taxation. “This becomes especially important as booming house prices inflate estate values, while the Chancellor’s freeze on tax protections mean that more and more people are facing a hefty tax bill,” he added.
A five-year freeze in tax breaks announced at the March Budget will mean thousands more families being forced to pay in the coming years. Coronavirus deaths and booming house prices will result in the government raking in an extra £1bn over the period, with the overall tax haul reaching a record £6bn by the end of this tax year, up from £5.4bn in 2020-21.
The IHT allowance has not risen since 2009 despite years of inflation and rampant house price growth and will stay at its present level until 2026 at the earliest.
The “family home allowance” which provides an additional £175,000 in tax protections to individuals passing on their main home to a direct descendant has also been frozen.
Other tax-free gifts
You can make gifts of unlimited size tax free, as long as you survive the gift for seven years. If you die within the seven year window the money will be counted as part of your estate.
Gifts out of your “normal income” can be unlimited and are tax exempt from day one, as long as you can show it has not had any effect on your lifestyle.
You can make an unlimited number of smaller gifts, of up to £250, but cannot use this small gifts allowance on someone if you have used one of the larger allowances on them already.
You can give away up to £3,000 worth of tax-free gifts each year and can roll your allowance into the following tax year if you did not use it, but only for one year. After that the gift allowance is reset.
Parents can give up to £5,000 to their children as a wedding gift, or £2,500 for grandchildren and great grandchildren who are tying the knot.