Gifts from Income
I don’t wish to drown you with detail, but it is possible to make gifts from income, provided that this is not to your detriment or deliberately reduce the value of your estate for IHT planning. If that sounds like an oxymoron… well, that’s the state of the tax system.
How do you demonstrate legitimate regular gifts from income? without a summary of your tax year income and expenditure I’d suggest that it will be fairly “difficult”. A business doesn’t have this problem – there are obvious accounts, or at least there should be, but as individuals perhaps the rule of thumb ought to be – think of yourself as a business – which means keep details carefully.
Taking a look at the last page of the form IHT403, you will observe that HMRC will request details of income and expenditure for the last 7 years. Could you provide this for yourself today? if not, how on earth will your Executors?…. hence one of the reasons we ask clients to update us with income and expenditure information every tax year… enabling us to help them build up a record – but also to do all the other sensible financial planning stuff – like helping reduce income taxes, checking that our assumptions about future lifestyle costs are broadly right and where it’s all going… and ideally to help them catch rather more of it than they otherwise would. So yes, those forms are rather important both whilst you are alive or deceased.
In practice, it is possible that HMRC might even wish to go even further back in time, perhaps as much as 14 tax years prior to death…. so my advice is to get your “ducks in a row” – which has several important positive by-products.
- Better budgeting
- Better financial planning
- Lower income taxes
- Reduced costs
- Longer-lasting wealth…
You heard it here – make an HMRC form your best financial planning tool!
You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email firstname.lastname@example.org