tax on gift

gryffin

hi

what is a tax on gift?

Thanks

CLAPTON

no tax on gifts for either the giver or receiver...
any gifts however made within 7 years of your death will be included in your estate for IHT purposes

Bean_Counter

Tax on gifts really relates to inheritance and not income tax, so the £5K allowance you referred to is irrelevant.

You can gift as much as you want if you plan on surviving 7 years or more.

lincsdan86

There is no limit on the amount your can transfer, but try not to die within 7 years of the gift otherwise like others have said the amount will come under your estate and there could be tax due

CLAPTON

no, there is no need to declare it.

ajbisgr8

As your son is under 18, the following applies to the interest (from HMRC website).

There are special rules if a parent has given savings to their child. Where gifts from a parent produce more than £100 gross income a year, the whole of the income from the gifts is taxed as the parent’s income. A child cannot claim back any tax on that income. Nor can interest be paid without tax taken off.

The £100 rule applies to young people until they reach 18 or marry (whichever comes first).

The £100 rule applies separately to each parent. It does not apply to gifts given by grandparents, other relatives or friends.

inamabilis

Are you giving a gift that will produce more than £100 of income a year?

ajbisgr8

It's basically to stop parents putting their own savings in their kids names to save on tax. it only applies to 'gifts' of savings from parents (not friends or other relatives). If your son was over 18 it would not apply.

If the gift is not going to produce £100 of interest then you don't need to worry about it. If it is, it just means that the interest will be treated as your income, rather than your sons so won't be covered by his personal allowances.

inamabilis

The money you give to him wont be taxed regardless of how old he is - it's the money that your gift then generates that will be.
If your son is under 18 and the gift you give to him will generate more than £100 then the money generated is taxed as if it were your own money.
If your son is 18 or over or the gift will not generate more than £100 then the money generated it is taxed as if it is (and always was) your sons.

jennifernil

Plus, if you are giving it to him to save, open a new account with annual interest, then there will be no interest this tax year, or before he is 18.

inamabilis

If he's 17 or it generates more than £100 interest then the tax is paid as if the interest was paid on your own money. If you pay tax then this is 20%.
If he's 18 and he doesn't pay tax (income below the threshold) then he can claim back any tax paid on the interest. If he does pay tax then the interest will be taxed as well (20%).
Depending on how much you're giving him he could pay it in to an ISA and avoid tax all together I think.
Best to have someone confirm what I've said though.

It's important to realise that the taxes apply only to the income generated from your gift.