Could you have to pay inheritance tax on a wedding gift?
Before the big day comes around, whether you are a guest giving a present or contributing to the cost of the honeymoon, or perhaps a relative considering helping towards the cost of the wedding itself, you ought to consider the inheritance tax implications of making such gifts. James Mabey, partner at law firm Winckworth Sherwood advises on the inheritance tax implications of wedding gifts.
In the UK, if you die within seven years of making a gift, inheritance tax may be payable on the value of the gift after your death. This is because gifts are considered to be part of your estate for inheritance tax purposes.
There are a number of exemptions and reliefs available to reduce or eliminate the inheritance tax liability on gifts. These include, but are not limited to:
The annual exemption: you can give up to a total of £3,000 each tax year (to one person or split between a number of people) without incurring any inheritance tax liability. Any unused annual exemption can be carried forward one tax year.
The small gifts exemption: you can give up to £250 per person (to an unlimited number of people) each tax year.
Gifts in consideration of marriage or registration of civil partnership: you can give up to £5,000 to a child; £2,500 to a grandchild or great-grandchild; and £1,000 to any other person in consideration of their marriage or civil partnership.
The gift must be made on or shortly before the marriage or the registration of the civil partnership and be conditional on it taking place. You can combine this exemption with the annual exemption (but not the small gifts exemption), so a parent could gift their child up to £8,000 (a £5,000 gift made in consideration of marriage plus using their £3,000 annual exemption), or even up to £11,000 if they are able to carry forward a full unused annual exemption from the previous tax year."