Gifts out of income

It is well known that gifts out of income are exempt from inheritance tax.

To calculate gifts that can be made out of income, you take your gross income, deduct tax, deduct living expenses and the balance is the income out of which you can make gifts exempt from inheritance tax.

Income and expenditure are calculated on an accounting basis and not a cash basis, so for example the proceeds from the disposal of an investment are not “income”.

Robin John is a chartered accountant and chartered tax advised and a director of Wellden Turnbull. The above is for guidance only and may not be relied upon without taking further advice.