Martin Lewis explains how grandparents can gift cash without incurring inheritance tax

While it's common for parents and grandparents to leave money to their next of kin in their wills, there is an important rule regarding gifting money early that many may not be aware of. Money Saving Expert Martin Lewis recently offered some crucial advice on how to avoid inheritance tax when gifting cash to family members through a first-time gift hack.

During an episode of his Not The Martin Lewis Podcast, a listener asked: "My grandparents wish to gift me part of my inheritance early. I understand that they can give £3,000 each tax-free. But since this is the first time, can they carry over last year's allowance? ".

Tax expert Kari Mellon from Opes Tax responded to the listener by saying: "Yes, £6,000 in the first year and then £3,000 for each year afterwards."

BBC Sounds presenter Martin Lewis added some more valuable advice, saying: "They may be able to give you more if they have surplus income that they could give away."

Rebecca Benneyworth, from her own firm, further explained the regularity of the gifts and their effects on tax, saying: "Providing you make regular gifts from your surplus income which do not affect your standard of living, those gifts are immediately free from inheritance tax," reports the Express.

She also raised a crucial point: "But first of all, you have to identify what is your surplus income. If you take in all of your income that you receive in a year, take off all of your expenses including a new car or a holiday and your tax liability. If you have a surplus left over, then that's the maximum that you could give away."

Following on, she explained: "There was a case a few years ago where someone died after only making one or two gifts out of surplus income, but the executors were able to prove that the intention was there to make it a very regular pattern, so they were successful in their claim."

"But if you've made them three or four times a year for a number of years, you've got a really good pattern there."