With wedding season' now in full swing with couples taking advantage of the summer months - and hopefully some accompanying summer weather - guests will be starting to consider what gifts to give the happy couple to celebrate their big day.
Increasingly these days, couples already live together before their marriage, meaning they will most likely have all of the household items that were so popular as wedding presents in days gone by.
Nowadays, one of the main types of gift given to newlyweds are gifts of cash as well as being frequently requested as wedding gifts, this comes with the added benefit to the donor that it will be exempt from inheritance tax (IHT) providing it is given on or shortly before the date of the wedding or civil partnership.
The level of tax relief varies depending on the relationship between the person who gives the gift and the recipient. Each parent, including step parents, can give up to £5,000 tax free. Grandparents can each give up to £2,500, and other relatives and friends can each give up to £1,000.
All taxpayers are eligible to take advantage of an annual IHT gift allowance of £3,000 per financial year and records should be kept of all gifts given, including wedding gifts.
In addition for those making smaller cash gifts, there is the Small Gifts Exemption that can be taken advantage of, which allows as many gifts of under £250 to be made as you wish – they will all be exempt.
Alternatively, there is also the ability to give away an unlimited amount provided it is out of excess income’. This is a means of preventing your estate from increasing in value. Many people use this means of inheritance tax planning to give money to children and grandchildren on a regular basis but these gifts can be given to whomever you want. If making gifts in this it is essential that comprehensive records are kept to show that after paying your living expenses you are able to make the gift without compromising your lifestyle.
If you wish to make gifts over and above permitted allowances then you would need to survive the gifts by seven years for the value to fall outside of your estate and not affect your individual tax free allowance which is currently £325,000
With regard to the bride and groom themselves – if, to mark their wedding day, they wish to give a gift of cash to each other, it will be completely free of IHT and Capital Gains Tax (CGT). With further regard to CGT, if couples who plan to marry both own properties, they risk running into complications once they become husband and wife. The main residence exemption for CGT applies only to one property per married couple, so it must be decided which property will be the main marital home’.
If any further clarity is required with regard to your IHT or CGT liabilities, expert advice should be sought.