I have set up a direct debit for my two children for £240 each per month to go into their self-invested personal pensions. I have done this for a few years, however, I have now retired. My pension pays about £1,000 a month and my fixed living costs are £500 a month (council tax, utilities etc). For other outgoings, such as holidays and social events, I use my savings.
I know that gifts out of regular income are immediately free of inheritance tax (IHT) as long as they do not affect your standard of living — but how does HM Revenue & Customs define standard of living?
To my way of thinking, it would be fixed costs and not nights out or holidays as these are nice-to-haves and not necessities. I wouldn’t want my children to be saddled with a tax bill upon my demise. Am I correct in my assumption or merely believing what I want to believe? Any insight would be gratefully received.
Simon, Suffolk
Nimesh Shah replies
