Wedding gifts could be next tax target
People who give cash as a wedding present could be taxed, national law firm Shoosmiths has warned.
Tax is one of the last things on people’s minds as they plan the big day, but with wedding costs as high as £30,000, parents and other family members may find themselves paying an unnecessary Inheritance Tax (IHT) charge if they give cash gifts to the happy couple.
Karen Shakespeare, partner and private client specialist at Shoosmiths, said: “It is not uncommon for parents and other family members to give cash to the engaged couple to help pay for the wedding, and it appears common sense to let the couple decide how to spend the cash themselves. However, large cash gifts may exceed the donor’s available tax reliefs, leading to an IHT charge.
“If parents pay for specific wedding costs, such as the catering or the honeymoon, there would not be a problem.”
The amount of money that can be given IHT-free per wedding would easily fall short of being able to cover the average wedding cost.
Shakespeare added: “Each parent can give £5,000, each grandparent or great grandparent can give £2,500, the bride can give £2,000 to the groom and vice versa, and all other parties can give £1,000. These gifts must be made before the ceremony and will only be exempt from IHT if the ceremony subsequently takes place.
“In addition to the above, there is an annual exemption of £3,000 for gifts made by any person per tax year. There is also a small gift exemption for gifts of up to £250. So wedding guests could give up to £500 to the newly weds as a wedding present and this would be IHT exempt. As wedding presents are given after the wedding ceremony, the £1,000 exemption mentioned above would not apply.”