Martin Lewis warns grandparents who 'gift' their grandchildren money

Martin Lewis
-Credit: (Image: ITV)

Martin Lewis has issued a crucial £3,000 tip on inheritance tax concerning the gift allowance for grandparents. A listener inquired on the Not The Martin Lewis Podcast, which is known for bringing experts to unpack topics like inheritance tax and about early gifting from grandparents can work.

The person 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? ".

Now, according to Birmingham Live, tax consultant Kari Mellon has spoken out. Kari, from Opes Tax, gave a positive response, saying: "Yes, £6,000 in the first year and then £3,000 for each year afterwards."

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MoneySavingExpert Martin Lewis chimed in during the BBC Sounds broadcast saying: "They may be able to give you more if they have surplus income that they could give away."

Financial expert Rebecca Benneyworth from Rebecca Benneyworth & Co added her insight: "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."

She also detailed the process of determining surplus income for such gifts:"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."

She continued: "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."

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