Gifts out of income

This exemption is in relation to lifetime gifts made out of income and is limited in amount to the extent of a donor’s (net) surplus income. The qualifying conditions are:

• The gift must be made as part of the normal expenditure of the donor
• HMRC’s interpretation is that the gifts should form part of a regular pattern of payments.
• The exemption may be available where it can be shown that the donor had made a firm commitment regarding future expenditure. You should document this intention, possibly by letter.

Examples of regular gifts could include Christmas and birthday gifts, annual family holiday, insurance policy premiums, education costs, private healthcare arrangements, etc. The donor must retain sufficient income to maintain his (or her) standard of living. Whether or not a gift is made out of income is a subjective test. The amount of income needed, and any available surplus will vary depending upon the particular circumstances of the donor at different times.