Receiving a gift from a friend

whereschris

Hi,

A very close friend inherited a considerable sum of money several years ago. He has invested it in property and I have helped him out with bits and bobs over this period. I would definitely not refer to it as work but rather a favour here and there like helping him decorate etc... Anyway, I have recently become a little tight on cash and he said let me give you some money. He said that he will gift it to me so that I don't need to pay tax on it.

Is it that straight forward? I am self employed.

Thanks

ShaneUK

How much is he going to be gifting you? I think that is going to be key for starters

CLAPTON

gifts are free of tax in the UK
however it depends upon whether it is really a gift
what sort of self employment do you do; is it related to the help you gave him

whereschris

Hi,

He is proposing £10k. I work as a musician so it is not at all related to his business.

thenudeone

You can gift as much as you like to anyone without any tax implications, as long as you survive for 7 years afterwards.

If the donor dies within 7 years, a sliding scale proportion of the gift value gets added back into the donor's estate for inheritance tax purposes, which could still mean there is no tax to pay.

whereschris

Hi,

Thanks for that. So as long as my mate does not pop his clogs in the next 7 years it'll all be fine?

CLAPTON

thenudeone wrote: »

You can gift as much as you like to anyone without any tax implications, as long as you survive for 7 years afterwards.

If the donor dies within 7 years, a sliding scale proportion of the gift value gets added back into the donor's estate for inheritance tax purposes, which could still mean there is no tax to pay.

as I think I've said before, the sliding scale only applies if the sum of GIFTS add up to more than the IHT limit (325,000) and NOT if the sum of gifts is less than 325,00.

CLAPTON

whereschris wrote: »

Hi,

Thanks for that. So as long as my mate does not pop his clogs in the next 7 years it'll all be fine?

normally IHT is paid from the estate so it's unlikely that you would have any liability

whereschris

Hi,

That's great. Thanks for the advice

Savvy_Sue

Be very clear with them that this IS a gift, and not an 'as and when' loan, at least if you want to stay friends with them! These things end in tears if one person understood it as a gift, and the donor only thought of it as a loan but they weren't (at the time of giving) fussed about when it was paid back.

Mojisola

Savvy_Sue wrote: »

Be very clear with them that this IS a gift, and not an 'as and when' loan, at least if you want to stay friends with them! These things end in tears if one person understood it as a gift, and the donor only thought of it as a loan but they weren't (at the time of giving) fussed about when it was paid back.

This is really good advice. Get something put in writing - a letter from the friend mentioning the amount of the cheque and stating that it is a gift.