Tax on Cash Gift from Parent?

Hughesy84

If a parent gave me £25k to put towards a house deposit - then is it exempt from UK Tax?

The mortgage company dont require a letter to say its a gift, but what about tax rules?

Thanks

CLAPTON

no tax on gifts in the UK although if you die with 7 years there might be a IHT liability depending upon the full circumstances

Mouse1812

To be precise: if your parent dies within 7 years, not you.

Hughesy84

Mouse1812 wrote: »

To be precise: if your parent dies within 7 years, not you.

Why would I then pay tax? What about it being classed as inheritance tax if that happened?

dori2o

If the parent that gave you the £25k died within 7 years of the gift, then the amount would be added back into the persons estate when calculating IHT. If their estate is likely to be below the threshold then there will not be a problem. If however the potential estate is above the IHT threshold, then the ESTATE will be responsible for paying any tax due. The person receiving the gift will have no liability, it all falls on the ESTATE of the deceased.

jem16

Hughesy84 wrote: »

Why would I then pay tax? What about it being classed as inheritance tax if that happened?

IHT would be due on the estate. Whether that comes back to you as a bill to be paid depends on how the estate is to be paid.

xylophone

The seven-year rule - 'potentially exempt transfers'
http://www.hmrc.gov.uk/inheritancetax/pass-money-property/exempt-gifts.htm#4

Any gifts you make to individuals will be exempt from Inheritance Tax as long as you live for seven years after making the gift. These sorts of gifts are known as 'Potentially Exempt Transfers' (PETs).
However if you give an asset away at any time, but keep an interest in it - for example you give your house away but continue to live in it rent-free - this gift will not be a potentially exempt transfer. Follow the link below to find out more.
If you die within seven years and the total value of gifts you made is less than the Inheritance Tax threshold, then the value of the gifts is added to your estate and any tax due is paid out of the estate.
However, if you die within seven years of making a gift and the gift is valued at more than the Inheritance Tax threshold, Inheritance Tax will need to be paid on its value, either by the person receiving the gift or by the representatives of the estate.
If you die between three and seven years after making a gift, and the total value of gifts that you made is over the threshold, any Inheritance Tax due on the gift is reduced on a sliding scale. This is known as 'Taper Relief'.