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    • Gnittih
    • By Gnittih 10th Oct 17, 7:11 PM
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    Gnittih
    Gifts from Income
    • #1
    • 10th Oct 17, 7:11 PM
    Gifts from Income 10th Oct 17 at 7:11 PM
    If I make monthly contributions into JISAs from a joint bank account into which my retirement income is paid,how do I ensure that contributions are attributed to me (for HMRC acceptability)and not my wife who is the other joint owner of the bank account.

    Is it sufficient that I sign the investment application form at the same time as thr Direct Debit authorisation referring to the joint bank account?
Page 1
    • Keep pedalling
    • By Keep pedalling 10th Oct 17, 8:46 PM
    • 4,100 Posts
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    Keep pedalling
    • #2
    • 10th Oct 17, 8:46 PM
    • #2
    • 10th Oct 17, 8:46 PM
    All our giving comes out of a joint account, we just keep a record of who gave what to who over the last 7 years and keep a copy with our wills. Be careful about the validity of giving from income, you can't for instance claim that, and in the same financial year raid your savings to pay for a holiday, new car or new boiler.

    We can't gift from income because we are drawing down from savings to support our current lifestyle.
    • Gnittih
    • By Gnittih 10th Oct 17, 8:57 PM
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    Gnittih
    • #3
    • 10th Oct 17, 8:57 PM
    • #3
    • 10th Oct 17, 8:57 PM
    Thanks,..but holidays,car,etc would come from capital!,
    • Keep pedalling
    • By Keep pedalling 10th Oct 17, 9:15 PM
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    Keep pedalling
    • #4
    • 10th Oct 17, 9:15 PM
    • #4
    • 10th Oct 17, 9:15 PM
    Thanks,..but holidays,car,etc would come from capital!,
    Originally posted by Gnittih
    But that was my point, if your annual spend is higher than your income, including capital spend, you cant claim IHT exemption on gifts from income.
    • Gnittih
    • By Gnittih 10th Oct 17, 9:26 PM
    • 39 Posts
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    Gnittih
    • #5
    • 10th Oct 17, 9:26 PM
    • #5
    • 10th Oct 17, 9:26 PM
    I understand that expenditure such as utilities,car/house insurance,household costs etc need to be subtracted from Income to realise what part of income can go to gifts!...but that surely doesn't include my spend on a new car at say 30000 which would come from capital savings in a Building Society or from other Equity investment.?
    • Linton
    • By Linton 10th Oct 17, 9:41 PM
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    Linton
    • #6
    • 10th Oct 17, 9:41 PM
    • #6
    • 10th Oct 17, 9:41 PM
    Keep Pedalling is correct, you cannot claim IHT exemption for gifts from income if your capital is decreasing. Your total income must exceed your total expenditure. However you do have carry over of IIRC 3 years.
    • Skibunny40
    • By Skibunny40 10th Oct 17, 9:49 PM
    • 86 Posts
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    Skibunny40
    • #7
    • 10th Oct 17, 9:49 PM
    • #7
    • 10th Oct 17, 9:49 PM
    So as long as the savings/investments had a good year, and the total is the same or higher at the end of the year than the previous year, it would be okay to buy eg. a new car for 30k and still be able to justify other gifts from income?
    • Gnittih
    • By Gnittih 10th Oct 17, 9:50 PM
    • 39 Posts
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    Gnittih
    • #8
    • 10th Oct 17, 9:50 PM
    • #8
    • 10th Oct 17, 9:50 PM
    Keep Pedalling is correct, you cannot claim IHT exemption for gifts from income if your capital is decreasing. Your total income must exceed your total expenditure. However you do have carry over of IIRC 3 years.
    Originally posted by Linton
    What does IIRC refer to?

    If capital is involved in any calculations,it becomes pointless setting up a continuous Direct Debit of Gift, since at some year during this gift making one will probably make a large purchase from capital!
    • Keep pedalling
    • By Keep pedalling 10th Oct 17, 9:55 PM
    • 4,100 Posts
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    Keep pedalling
    • #9
    • 10th Oct 17, 9:55 PM
    • #9
    • 10th Oct 17, 9:55 PM
    I understand that expenditure such as utilities,car/house insurance,household costs etc need to be subtracted from Income to realise what part of income can go to gifts!...but that surely doesn't include my spend on a new car at say 30000 which would come from capital savings in a Building Society or from other Equity investment.?
    Originally posted by Gnittih
    Yes it does, anything you spend whether a loaf of bread or a new car counts as part of your annual spend. The gifting from income exemption is designed for people who's excess income would simply go to increase the size of their estate and add to their estates IHT liability. If you are giving and at the same time spending your capital this is not the case.

    If you are both reasonably healthy and you want to reduce the impact of IHT on your heirs, then make use of both your 3000 allowances, use the 7 year rule to gift more, and cover any IHT that may fall on those gifts with a second death term insurance. This is basically what we have done.
    • Keep pedalling
    • By Keep pedalling 10th Oct 17, 9:59 PM
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    Keep pedalling
    So as long as the savings/investments had a good year, and the total is the same or higher at the end of the year than the previous year, it would be okay to buy eg. a new car for 30k and still be able to justify other gifts from income?
    Originally posted by Skibunny40
    No, it is based on what you spend against your income, capital gains are not considered as income.
    • Linton
    • By Linton 10th Oct 17, 10:00 PM
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    Linton
    So as long as the savings/investments had a good year, and the total is the same or higher at the end of the year than the previous year, it would be okay to buy eg. a new car for 30k and still be able to justify other gifts from income?
    Originally posted by Skibunny40
    No, investment gains aren't income. The test is simply expenditure vs income over 3-4 years.
    • Linton
    • By Linton 10th Oct 17, 10:02 PM
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    Linton
    What does IIRC refer to?

    If capital is involved in any calculations,it becomes pointless setting up a continuous Direct Debit of Gift, since at some year during this gift making one will probably make a large purchase from capital!
    Originally posted by Gnittih
    IIRC= if I remember correctly
    • Keep pedalling
    • By Keep pedalling 10th Oct 17, 10:04 PM
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    Keep pedalling
    No, investment gains aren't income. The test is simply expenditure vs income over 3-4 years.
    Originally posted by Linton
    Thanks, I was now aware of the 3-4 year thing. Does not help us though as part of our IHT reduction scheme is to spend capital on ourselves every year.
    • Gnittih
    • By Gnittih 10th Oct 17, 10:15 PM
    • 39 Posts
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    Gnittih
    I am confused!....

    My income is such that I do not spend all of it,consequently the surplus gets added to capital,..increasing assets.In a similar way my investments gain in value and are reinvested,again increasing my assets.Future IHT on the increase. After using annual gift allowances and not wishing to use 7 year rule...I thought I could make use of the Gifts from income provision!.
    • Linton
    • By Linton 10th Oct 17, 10:15 PM
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    Linton
    Thanks, I was now aware of the 3-4 year thing. Does not help us though as part of our IHT reduction scheme is to spend capital on ourselves every year.
    Originally posted by Keep pedalling
    Gifts from income is useful for those who retired with large annuities. Not so useful now when people retain large amounts of capital.
    • Keep pedalling
    • By Keep pedalling 10th Oct 17, 10:47 PM
    • 4,100 Posts
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    Keep pedalling
    I am confused!....

    My income is such that I do not spend all of it,consequently the surplus gets added to capital,..increasing assets.In a similar way my investments gain in value and are reinvested,again increasing my assets.Future IHT on the increase. After using annual gift allowances and not wishing to use 7 year rule...I thought I could make use of the Gifts from income provision!.
    Originally posted by Gnittih
    But you said large purchases would come out of capital, so you must spend it alll some years. Under those circumstances why would you not want to use the 7 year rule? It sound like rather like me you have reached the stage of life where there is no point in building up further capital because you already have enough to maintain your lifestyle for the rest of your life.
    • Gnittih
    • By Gnittih 11th Oct 17, 9:16 AM
    • 39 Posts
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    Gnittih
    But you said large purchases would come out of capital, so you must spend it alll some years. Under those circumstances why would you not want to use the 7 year rule? It sound like rather like me you have reached the stage of life where there is no point in building up further capital because you already have enough to maintain your lifestyle for the rest of your life.
    Originally posted by Keep pedalling
    I'm aware I can and will spend and make gifts under th 7 year rule,but where I am confused is that in another members message he says any large sums such as car purchases,say 30000,would be classed as expenditure wrt subtraction from Income for assessing IHT!?.....hence this might effect any large monthly DD I might set up for Gchildren
    • Linton
    • By Linton 11th Oct 17, 9:43 AM
    • 8,636 Posts
    • 8,610 Thanks
    Linton
    I am confused!....

    My income is such that I do not spend all of it,consequently the surplus gets added to capital,..increasing assets.In a similar way my investments gain in value and are reinvested,again increasing my assets.Future IHT on the increase. After using annual gift allowances and not wishing to use 7 year rule...I thought I could make use of the Gifts from income provision!.
    Originally posted by Gnittih
    The whole area seems complex and rather ill defined. Contentious areas can only be definitively resolved by the courts. You or your executors may not wish to pay for this. However the distinction between capital and income is fundamental. Saved income becomes capital after about 2 years.

    It would appear that interest and dividends are income so you may have some wriggle room there. I have seen it said that the use of capital for a house extension would not be regarded as expenditure. However a car purchase would seem to be rather different unless you were investing in classic cars.

    Perhaps you should consult a tax lawyer.
    • Gnittih
    • By Gnittih 11th Oct 17, 10:17 AM
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    Gnittih
    Would all the following be classed as Income?....that I can use to calculate against expenditure.

    Occ.Pension
    State Pension
    Annuity payments
    Cash ISA gross interest...reinvested
    Equity ISA gross dividends...reinvested
    • xylophone
    • By xylophone 11th Oct 17, 10:31 AM
    • 23,666 Posts
    • 13,793 Thanks
    xylophone
    http://www.pruadviser.co.uk/content/knowledge/technical-centre/normal-expenditure-facts/

    may be worth a read.
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