Gifting when income exceeds expenditure

Franje1950

My mother (aged 89) has income that exceeds her outgoings every month by at least £800.
Can this be gifted to her children on a regular basis?
I have read the Inland Revenue site but feel no wiser.
Many thanks

ceeforcat

This should help under 'exempt gifts'.

http://www.hmrc.gov.uk/inheritancetax/pass-money-property/exempt-gifts.htm

HappyMJ

Franje1950 wrote: »

My mother (aged 89) has income that exceeds her outgoings every month by at least £800.
Can this be gifted to her children on a regular basis?
I have read the Inland Revenue site but feel no wiser.
Many thanks

She can employ you or her children or anyone else to do work for her. Such as a bit of cleaning £10 an hour. Shopping £10 an hour. Driving her to places £10 an hour and £1 a mile. You would have to declare that money as self employment income and pay tax on it but if you have any free personal tax allowance you can use this could be tax free. It's not official it's just a way around it as it isn't a gift it's payment in return for services.

CLAPTON

your grandmother can of course give any amount of money to any she likes.

the only tax issue is the potential for inheritance tax if she dies within 7 years and if her estate is greater than the IHT limit (either 325,000 or 650,000 if her estate could use her spouses allowance)

howevere if the money is given regularly from income and doesn't afffect her standard of living then the gifts are exempt for IHT purposes

Franje1950

These include:

• monthly or other regular payments to someone

So I'm assuming she could pay, say, £300 per month by standing order, to my sister and I, and that would be perfectly legal?

Franje1950

Thank you for that link. It must have been the one page that I missed.

CLAPTON

Franje1950 wrote: »

These include:

• monthly or other regular payments to someone

So I'm assuming she could pay, say, £300 per month by standing order, to my sister and I, and that would be perfectly legal?

legality has nothing to do with it.

the only issue is whether or not is potentially liable to inheritance tax should she die within 7 years

ceeforcat

I must say that I have never interpreted 'regular' in this instance as being in the form of a monthly standing order - sort of removes the gift element for me. I always held the view that regular meant habitual as in every birthday, Christmas or even holiday times. Still, as Clapton says, legality has nothing to do with it.

I had also taken into account your mother's age.

What would her estate be worth, roughly?

xylophone

Regular gifts or payments that are part of your normal expenditure
Any regular gifts you make out of your after-tax income, not including your capital, are exempt from Inheritance Tax. These gifts will only qualify if you have enough income left after making them to maintain your normal lifestyle.
These include:
monthly or other regular payments to someone
regular gifts for Christmas and birthdays, or wedding/civil partnership anniversaries
regular premiums on a life insurance policy - for you or someone else

The importance of keeping records
It will help your executor or personal representative to sort out your financial affairs when you die if you keep a record of any gifts you make and note on that record which exemption you've used.
It's also a good idea to keep a record of your after-tax income if you make regular gifts out of income as part of your normal expenditure. This will show that the gifts are regular and that you have enough income to cover them and your usual day-to-day expenditure without having to draw on your capital.

From http://www.hmrc.gov.uk/inheritancetax/pass-money-property/exempt-gifts.htm

thenudeone

To be absolutely clear - gifts are free of tax in the UK.

But - if the donor dies within 7 years, a proportion of any gifts is added to the estate for IHT purposes. All of the above discussions relate to this aspect.

Since the IHT threshold is currently a sizeable £325k http://www.hmrc.gov.uk/rates/iht-thresholds.htm, the gifts will only an eventual IHT charge if, when added to all of the donor's other assets less liabilities (including her home, if owned), the total exceeds £325k.

However, if she happened to withdraw, say, £200 a week in cash; and gave it to friends or relatives without anyone making any records, there would be little anyone could do to prove any IHT was due:)

jennifernil

Yes, if she makes regular gifts out of income, no problem. We have a standing order to save money for our grandchildren out of income. We have also in the past given regular sums monthly to our daughter, again out of income.