By Emi Page, Associate at Winckworth Sherwood

With diaries now filled with weddings and civil partnerships for this year and next, the question of what to gift to the happy couple will be on the minds of family and friends; and although rather unromantic, it may be helpful for guests to consider the inheritance tax implications of such wedding gifts.

Over time, with more couples co-habiting and setting up a home together before marriage or civil partnership, the traditional wedding list of homewares and the like, has started to be replaced by gifts of cash – whether as a contribution to the honeymoon or to a larger home improvement or item.

Irrespective of whether you are gifting cash or possessions however, there are some limited inheritance tax reliefs available, that you may want to consider before making your gift.

As a general rule, if you die within 7 years of making a gift, inheritance tax may be payable on the value of the gift after your death, subject to a number of reliefs and exemptions depending on when the gift was given, its value and the recipient.

There are some well-known general exemptions, such as the annual exemption and the small gift exemption. The annual exemption allows an individual to gift (to either one person or split between several people) up to a total of £3,000 each tax year, free of inheritance tax. If you do not use your £3,000 annual exemption, you can carry this forward one tax year. The small gift exemption allows you to gift up to £250 per person (to an unlimited number of people) each tax year. You cannot use the small gift exemption when making a gift to an individual that you have already used another exemption on.

Another useful exemption from inheritance tax, is where gifts are made as part of normal expenditure out of income, as long as the gift(s) leaves you with sufficient income to maintain your normal standard of living. This exemption is currently uncapped in the amount you can gift and, therefore, can be very advantageous to those with high earnings.

Finally, there are also exemptions specifically for gifts made in consideration of marriage or civil partnership, which if relied on, may mean that you can retain the more general exemptions for other gifting you may have planned.

You can gift up to the following amounts, to someone who is getting married or entering into a civil partnership, and the amounts depend on your relationship with the recipient. You can gift up to:

• £5,000 to a child.
• £2,500 to a grandchild or great-grandchild.
• £1,000 to any other person.

The gift must be made on or shortly before the marriage or the registration of the civil partnership, it must be made in contemplation of the marriage or civil partnership, and the gift must be conditional on the marriage or civil partnership taking place.

You can combine this gift with another exemption, such as the annual exemption (but not the small gift 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 possibly up to £11,000 if they can carry forward a full unused annual exemption from the previous tax year.

Although useful, the value of these gifts is clearly limited. This is not surprising given that the values of the exemptions have not changed since 1984, whereas the cost of weddings and civil partnerships has grown exponentially. It is therefore important to be mindful of the tax implications if you are planning on making a large gift to someone who is getting married or entering a civil partnership, and to review the exemptions and their limits carefully so your gift can be made as tax efficiently as possible.