Tax Rules For Gifts

JonnyExeter

My father gave me £25000 last year to pay off a loan I took out to start a business.

Stupidly I asked my father to pay the money into my bank account rather than pay the loan off directly.

My question is do I have to declare this £25000 in a self assessment tax return as it was not from income earned through work.

Secondly if it has to be declared on my return what would the tax implications be to me immediately.

Thanking you advance for an advice given.

Jon

CLAPTON

gifts are tax free in the Uk although are potentially part of your fathers estate if he dies within 7 years
except for the 7 year rule for IHT, there are no tax implications and you have no need to mention it on your self assessment form

JonnyExeter

Heaven forbid anything happens to my dad in the next 7 years but how do they check over the past 7 years where his money has gone?

Sorry for the stupid questions which may seem obvious but I don't know.

CLAPTON

I hope your father doesn't die in the next 7 years

however, the executors of his estate are obliged to provide information about gifts over the previous 7 years

I'm sure they would be as honest as you are when filling in your self assessment forms

le_loup

JonnyExeter wrote: »

Stupidly I asked my father to pay the money into my bank account rather than pay the loan off directly.

Why stupidly, what would you have wanted to hide and from whom?

JonnyExeter

le_loup wrote: »

Why stupidly, what would you have wanted to hide and from whom?

Well I was thinking if I had asked my father to pay the money into the loan account instead of my own bank account then there would not have been any need to declare it as any sort of income.

( I was misled in the first instance and now I understand it fully)

le_loup

As you have heard, it's not income, not taxable and need not be declared to anyone ... IHT being the exception.
However, I was just interested in your thought process. You thought it might be taxable and you thought it may be evadable if you got the money paid over in an underhand manner. Don't you equate this with, at least, fraudulent thoughts?
Just as there is no gift tax, there is no such thing as thought crime, but this is not a site that promotes fraud.

JonnyExeter

Le Loop

Don't think I ever mentioned wanting to do anything underhand? It's called tax avoidance in my book not tax evasion.

How would it off been underhand to get my father to pay the loan account directly rather than put it in my account? That's not underhand it's just a matter of choice.

I just wanted a bit of sound advice from someone normal not someone trying to stir up a load of rubbish as they've totally misread the whole point.

How about changing your name to fruit loop?

Murdina

Just to clarify for all concerned.

Even if your dad had paid the loan direct it would have had the same effect for tax purposes.

It would still be a gift for IHT (he is discharging a debt for you).

If you were running a business and got a customer to pay one of your debts direct that money would still be income of the business.

If you wanted him to "avoid" IHT you would have got him to lend you the money (and made it clear by documentation it was a loan).

JonnyExeter

Thank you Murdina & Clapton for your advice the whole thing is crystal clear to me now .

le_loup

JonnyExeter wrote: »

Don't think I ever mentioned wanting to do anything underhand? It's called tax avoidance in my book not tax evasion.

Had you not said "Stupidly I asked my father to pay the money into my bank account rather than pay the loan off directly", I might have had sympathy for your lack of knowledge.