Can one actually save hundreds of thousands without problems?

Sensory

G_M wrote: »

What I said was "If the relative gives back the same amount as was loaned, then ....".

So I was referring to an interest free loan, not a gift.

Much depends whether the original ...er.. 'handing over' of funds was done in expectation of its being returned. If the expectation on each side was that it would later be returned, it's a loan.
If not, it's a gift, with no obligation for it to ever be returned.

That's an understandable distinction, but is there an official process to make that differentiation? It could merely be considered reciprocating a gift.

G_M wrote: »

Yes - a gift may have inheritance tax implications, and indeed income tax if it were over the threshold for annual gifts.

I wasn't aware there was an annual threshold for gifts before they would be subject to income tax. Is that a recent change to the law?

Biggles wrote: »

Sounds like BS to me. As in 'I've got so much I can give it to my brother'.

It's more 'I don't understand tax so I'll store my savings in my brother's account'.

Biggles wrote: »

The fact is, a gift that is given on the understanding that it is being repaid isn't a gift at all as far as HMRC is concerned, the cash is still the property of the donor.

So how would tax function in that scenario?

pqrdef

So what's so terrible about going into a higher tax band?

atush

The risks of not getting back the cash (even if you trust your brother do you trust his wife/children if he died unexpectedly) are far too great to worry about paying a bit extra in tax.

You would be far better off thinking of ways to shelter your income FROM TAX int he first place from filling up eachyears cash ISAs (and s&S isas too perhaps) then putting 15K into an NSI ILSC, then thinking of putting some into a pension. In fact, if you don't have a pension this would be the time to get one as it would be your money SAFETLY tucked away in YOUR name but sheltered from income tax now. If you have no pension at all, this would be my first port of call after the cash ISA.

ncollier1

"but they said they weren't accountants"

Surprised they didn't say that they flunked primary school maths

nrsql

There are a few posible reasons for doing this
The money was not declared and it's a way of hiding it? e.g. if he was earning abroad and wanted to bring it into the country (illegally).
Is heading for a divorce/bankruptcy and wants to reduce the assetts


The amount of interest it is possible to get at the moment probably wouldn't make it worthwhile unless the loan was to someone with high interest debts which they could reduce.

thenudeone

pqrdef wrote: »

So what's so terrible about going into a higher tax band?

If your regular income is rising and taking you into the higher rate band that's good, because you are still getting at least 60% of your extra pay.

But, if your income is £50k in one year and only £30k the next; it's bad because paying higher rate tax may be unnecessary.
If there was some way to shift some of the taxable income from one year to the next (for example by making a large pension contribution in year 1 rather than a lower amount in both years) then the overall tax bill will be lower because none of it would be taxed at 40%.

nrsql

thenudeone wrote: »

If your regular income is rising and taking you into the higher rate band that's good, because you are still getting at least 60% of your extra pay.

But, if your income is £50k in one year and only £30k the next; it's bad because paying higher rate tax may be unnecessary.
If there was some way to shift some of the taxable income from one year to the next (for example by making a large pension contribution in year 1 rather than a lower amount in both years) then the overall tax bill will be lower because none of it would be taxed at 40%.

That's true but lending the money to someone else only decreases the tax on the interest - and if you aren't getting that then you are losing out. No different from leaving it in a 0% account. In your example the interest would need to be £20k for this to work.

bigfreddiel

lisyloo wrote: »

It's also possible to protect large amount using ISAs & NSI products.
I have pretty much all my money either in pensions, ISAs, NSI or offset, so I pay virtually no income tax on savings.

All it takes is some planning to use the allowances.

me too - when I retire my monthly tax bill we be about £20 -my monthly incoe will be about £1,800 :rotfl:

fj

crittertog

Sensory wrote: »

I wasn't aware there was an annual threshold for gifts before they would be subject to income tax. Is that a recent change to the law?

Nope, been like it for as long as I can remember.

Sensory

crittertog wrote: »

Nope, been like it for as long as I can remember.

What's the annual threshold? I know £3000 pertains to inheritance tax (with a one year rollover), but I can't find any information regarding income tax on gifts.