1. Intent of the donor: The donor of the gift must have a present intent to make the gift to the done and ay promise to make a gift in the future does not hold any ground from legal point of view.
   For example, if a man gifts a woman a ring and asks her to hold on to it till her next birthday, does not classify the ring as a gift from legal point of view and he could legally demand the ring back. However, if a man gives a woman a deed with her name and details mentioned on it, in this case his gift to her hold legal value to it and he would be unable to reclaim it.
2. Delivery of gift to done: In case the donor keeps a clear intent to gift, for example, a property to the donor, but is not able to deliver the same to the donee, then the gift is not considered as a legal gift.
3. Acceptance of gift by done: A gift is considered legally acceptable only if the donee has accepted the gift.

Transfers that qualify as a gift are a usually exempt from various tax laws and gifts can usually be made to persons or to qualified entities, for example to a registered charity. Usually, there are three types of ways that a gift can be transferred:

1. Inter Vivos Gift: This is a gift that is transferred during the life of the donor while they are still alive and it is irrevocable i.e. once transferred, donor cannot claim it back.
2. Causa Mortis Gift: This is a gift which is transferred in anticipation of imminent death and is usually effective upon the donor’s death and can be revoked up until the donor is alive.
3. Testamentary Gift: This is a personal gift distributed through a will and is transferred to the done after the donor’s death and it is also included in the overall distribution of the person’s estate.

As a normal understanding of gifts, it is a gesture of love and as a citizen of a free country one should be able to gift anything, either in cash or kind to the person of his or her choice. However, this is not the case and one need to understand what and how much he or she can gift without having any tax implication on it. Whether you are giving gifts in order to offer them a helping hand to get them onto the property ladder or to provide an income boost, there are inheritance tax implications to it which you should consider. Gift tax is a tax applied to an individual giving anything of value to another person and for something to be considered as a gift, the receiving party i.e. the done cannot pay the giver, i.e. the donor full value for the gift but may pay an amount less than its full value and normally it is the giver of the gift who is required to pay the gift tax.

Exempted gifts are those which you can give away without having any sort of tax implication on gifts and there is an allowance set for the same for a tax year, which is from 06th April to 05th April. You need to stay within the allotted allowance in order to save inheritance tax on Gift. Although you get allowance each year, it is advisable to utilize the allowance within that year or latest by next following year.

Each individual can annually give away up to £3,000 worth of gifts without having any inheritance tax on it and it is called annual exemption. You can carry forward any unused annual exemption to next year, but only for one year i.e. in case you did not make any gifts in 2014/15, your tax-free allowance for the year 2015/16 will be £6,000. It also implies that a married couple could give away a total of £6,000 a year to their children without incurring any inheritance tax and a total of £12,000 if the previous year’s allowances were unused. Apart from the yearly allowance, you can also make small gifts of up to £250 to any one person in one financial year. However, it is not possible to combine a small gift with your annual allowance.

Exempted gifts from inheritance gift tax implications are:

1. 1. Wedding or civil ceremony gifts of up to £1,000 per person, £2,500 for a grandchild or great-grandchild and £5,000 for a child.
2. 2. Normal gifts which you give away as a birthday or Christmas gift. However, it is important that you are able to maintain your normal standard of living after making the gift. In order to get benefited from this particular exemption, the gifts need to be made on a regular basis rather than it having a onetime affair. Moreover the gifts need to be made from your true income i.e. your income after tax and not from your savings. These exempt payment include:
   
   
   • Maintenance for your husband, wife, civil partner.
   • Maintenance for your ex-husband, ex-wife or formal civil partner.
   • Maintenance for relatives who depend on you.
   • Maintenance for your children, adopted children or step-children, as long as they are under 18 or in full-time education.
   • Regular gifts for Christmas, birthdays or weddings/civil partnership anniversaries.
   • Premiums on life insurance policies.
3. 3. Any sort of payments to help with another person’s living costs, such as an old relative or a child under 18 years.

1. 4. Gifts to charities and political parties: In order to save tax implications on your gift, you can leave some or your entire estate to a charity. However, you can choose to donate to a charity while you are alive or else you can declare this in your will. If you allocate 10% of your net estate to a charity, then in that case, inheritance tax will be cut down to 36%, instead of 40% on the rest of your estate value.
2. Lifetime gifts for the upbringing of children and other dependants, if any, do not have any tax implications on it. Few other exempts on the gifts are as below:
   
   
   • To the political parties.
   • To the educational institutions such as universities.
   • For national purpose.
   • For public health.

You can use more than one of the above listed exemptions on the same person in the same tax year. For example, you can gift your great - grandchild on her birthday and wedding in the same tax year, without having any tax implication on it. It is very important that you keep precise records of when you gift money and to whom, otherwise inheritance tax could be applicable on the gifts when you die. In case you are gifting large sums of money, for example, a deposit for a child’s home, ensure that you write and sign a dated letter to prove when the gift was given and how much was given.

However, any gift that you make has a 7-year rule applicable to it, which is also called as Benefit of Tapering, which can be stated as: If a person gives away more than £3,000 as gift in a tax year or has utilized any of the gift tax exemptions to save tax on his gifts, and dies within seven years of making that gift, leaving an estate of value more than £325,000, then the gift will have certain tax implications and same is explained in the below tabular format:

Broadly speaking, taxation in the United Kingdom involves payment of tax to three different levels i.e. The Central Government (Her Majesty’s Revenue & Customs), Devolved Government and Local Government. Inheritance tax is paid to the Central Government i.e. to the HMRC.

For example, if Susan gives £55,000 each to his son and daughter after considering annual exemptions and he dies in the year 2017 leaving an estate worth £375,000 and declares a will in which he leaves £100,000 to his wife. His will gives a legacy of £100,000 to his wife. Inheritance tax applicable to him will be as follows:

Gifts within 07 years of his death : £55,000* 2 = 110,000

Value of Estate : £375,000

Total : £485,000

Less : Gift to Spouse £100,000

Chargeable Estate : £385,000

IHT Threshold : £325,000

Balance : £60,000

Tax at : 40% £24,000

In case, you are liable to inheritance tax based on the net value of your estate, then probably you should look at ways to reduce your liability and by doing so, you ensure that your beneficiaries do not end up paying heavy chunk of money as tax.

If you are giving away a property, to your relative, you should consider tax implications, which will vary based on certain parameters such as if you know the person, his age and if there is any mortgage attached to the property in picture.

In case the person, i.e. the beneficiary, is a connected person, which include family members such as children, parents, grandparents (except cousins) as well as family trusts and business that are under donor and if a property is given away or sold at a cost less than its market value, then any tax applicable on it will be charged on it market value rather than on the value it is being sold, provided that the person who is receiving it is a connected person to the donor.

In case, the property that you are giving away as a gift, has not been your main residence for the entire duration that you have owned it, Capital Gains Tax will be applicable on it, however, if it has always been a buy-to-let property, then tax will be applicable on it for the entire time duration you have owned the property.

Capital gains tax is paid on the increase in the property’s value since it was bought, less expenses such as stamp duty and legal fees and there is an annual capital gains tax allowance of £11,000. Any gain, over and above this limit, will be charged at the rate of 18pc for a basic-rate taxpayer or 28pc for a higher-rate taxpayer.

Stamp duty is applicable on a property only if there is a mortgage attached to it and it is payable by the receiver of the. In case there is a mortgage attached to the property, the recipient has to pay the stamp duty on the balance or the outstanding value of the mortgage. Stamp duty land tax on the property was reformed in the year 2014 and it is more or less calculated like income tax. Rate of stamp duty as per various price band is as below:

For example, if Fred has bought a house worth £275,000. He pays no stamp duty on the first £125,000 and next £125,000 will trigger a 2pc tax charges of £2,500, and the remaining £25,000 will incur 5pc tax worth, which is another £1,250. So, on a property worth £275,000, he gives a total stamp duty bill of £3,750.

In case, you are giving away your rental property to your children who is under 18 years of age, you will be taxed on your rental income even if you are not receiving the rental income.