CHRISTMAS IS THE TIME FOR GIVING
Like the Capital Gains Tax (CGT), the Inheritance Tax (IHT) from Rishi Sunak’s Autumn Budget remained the same. Meaning each tax year individuals may make gifts of up to £3,000 in total. Even if this amount has been exceeded, there would be no inheritance tax payable.
The gift of an asset other than cash may also give rise to a capital gain and CGT may be payable where the asset has increased in value. However, if you give away a business asset such as shares in your trading company, it is possible to make a claim to hold over the gain so that no CGT is payable. We can, of course, advise you on the procedure to follow.
REGULAR GIFTS OUT OF YOUR INCOME IS TAX-EFFICIENT
Inheritance tax is for tax transfers of capital, so if the donor can demonstrate that the gifts are made from surplus income then the transfers are not taken into consideration for IHT. The exemption applies where there is a regularity to the payments, such as a standing order to pay school fees. HMRC will also require proof that the payments are paid out of post-tax income and do not limit the donor’s normal lifestyle. Detailed records are required, and we can help you with a suitable spreadsheet.
WE WISH YOU A VIRTUAL MERRY CHRISTMAS! (but alas, no figgy pudding!)
Last year, businesses put on a “virtual” Christmas party event and HMRC agreed that would be acceptable for there to be no taxable benefit for the employees involved.
There continues to be no taxable benefit for employees provided that all staff are invited, and the cost does not exceed £150 a head, inclusive of VAT. If you have also had an annual summer event, then provided the combined cost of the two events is no more than £150 a head then there would still be no taxable benefit. If, however, the summer event cost £80 a head and the Christmas party £100 a head only one event would qualify for the exemption.
CHRISTMAS GIFTS OF UP TO £50 PER EMPLOYEE ARE ALSO TAX-FREE
Remember that certain gifts to staff at Christmas are also tax-free if structured correctly. Employers can provide their directors and employees with certain “trivial” benefits in kind tax-free. This exemption applies to small gifts worth no more than £50 to staff at Christmas, on their birthday, or other occasions and includes gifts of food, wine, or store vouchers.