THE £37.4 BILLION INHERITANCE TAX GIVEAWAY

• More than one in four gave gifts as part of IHT planning in the past year
• Handelsbanken Wealth & Asset Management urges anyone giving gifts to take advice

Around £37.4 billion was given away in gifts to family and friends as part of Inheritance Tax (IHT) planning last year with handouts averaging more than £1,500, new research* from Handelsbanken Wealth & Asset Management shows.

The Handelsbanken study found more than one in four adults (28%) – the equivalent of 14.6 million people – gave gifts in the past 12 months at a rate of around £71,200 a minute across the country. Just under a quarter (24%) – or 12.6 million people – gave the cash as a series of regular payments during the 12 months.

More than 1.5 million people gave gifts of £10,000 or over to family and friends during the past 12 months, the research shows.

The most popular reason for gifting money was helping out family with their general living expenses – around 35% of those who gave gifts did so to help with bills, while 24% gave money to help with a property purchase and 22% gave money to support family with school or university fees.

However, Handelsbanken Wealth & Asset Management’s research found that just 15% of those who gave gifts last year said the purpose of their handout was to reduce the level of their taxable estate and any potential liability for IHT in the future – just marginally more than the 14% who gave money to help with wedding expenses.

People giving the gifts are not keeping records of their generosity which could be a potential problem with HMRC in the future with regards to IHT – just 40% say they always, or most of the time, keep notes of how much they have given while 28% admit they never keep records, with the rest rarely or only sometimes doing so.

Mark Collins, Head of Tax at Handelsbanken Wealth & Asset Management said: “It is interesting that so few people are motivated to give money to family as a way of reducing their estate and any potential IHT liability.

“People who give money regularly to family should know that the cash could be classified as surplus income, assuming the relevant conditions are met, and therefore immediately outside of their estate for IHT. That would be advantageous for their IHT planning, and it is also very important that proper records of money that is given as gifts are kept.

“Among our customers, we feel that there has been a recent increase in the number of people making or updating their wills, which in turn has led many giving thought to lifetime giving. We would always urge anyone doing so to take advice.”

Handelsbanken Wealth & Asset Management’s research found that of the 12.6 million who give regular gifts over a fifth (22%) do so every month, while one in seven (14%) give every two to three months or every four to six months. Nearly half (49%) do so at least once every six months.

The table below shows the picture across the country, with people living in London the most likely to have given gifts in the past 12 months.

Jessica Weisman-Pitts