Cash Gift from Mother to Son

mykethedrummer

Hiya everyone, new to this so not sure how it all goes so will just post my question..

My mum wishes to give me a one time cash gift of £40,000, as i am getting married in January and then in a 3 years the plan is to move to America with my American Wife to be.. i am 29 years old and my mum is 62 years old and I was wondering what the process was, and what would the tax etc be, and who should i talk to about it.. many thanks in advance and if i wasn't clear enough i'm sorry..

Mykethedrummer :-)

dzug1

The process is she writes you a cheque and you deposit in your bank account.

There will be no tax.

The only potential tax is that if she dies within 7 years the gift is added into her estate for inheritance tax purposes.

System

There would be no tax due by you on the gift itself though if you invest it there would be tax due on the interest.

The things your mum needs to think about are inheritance tax and what would happen if she needed to go into a nursing home within the next few years.

See here for information about IHT - http://www.hmrc.gov.uk/inheritancetax/intro/basics.htm

If your mum were to pass away within the next 7 years the £40,000 gift would be taken into account when valuing her estate

James,_Oxford

A parent can give up to £5,000 to their son or daughter on their marriage completely exempt from IHT.

If you took advantage of this then only the remaining £35,000 would be potentially subject to IHT.

As someone has already said if your mother survives for at least 7 years then the gift is ignored for the purposes of IHT. However there is something called taper relief which kicks in after 3 years from the date of the gift and starts gradually reducing the amount which could be charged to IHT.

James,_Oxford

One other point - everyone has an annual allowance of £3,000 per tax year. This means they can give away up to £3,000 per year completely exempt from IHT. It is also possible to carry forward any unused allowance from the previous year (but not the year before or any earlier years). So if your mother has not made any other gifts in the last 2 tax years, she will be able to give you £6,000 completely exempt from IHT.

The £6,000 allowance can be combined with the £5,000 marriage allowance, so you may be able to get £11,000 of the gift exempt from IHT.

localhero

However there is something called taper relief which kicks in after 3 years from the date of the gift and starts gradually reducing the amount which could be charged to IHT.

Taper relief only applies where the value of the gift exceeds the value of the nil rate band - and so is irrelevant in this case

It also doesn't reduce the amount subject to IHT - it reduces the percentage of the tax itself depending on how long the person making the gift survives.

James,_Oxford

Local Hero - you are correct.

Taper relief would only be relevant where the gift to Myke was not covered by his mother's nil band at death, which is unlikely.

mykethedrummer

thanks guys that is awesome, just what i need to hear.. many thanks..