Gifting when income exceeds expenditure

Franje1950

Thanks for the input. Will now discuss this with the rest of the family.

00ec25

thenudeone wrote: »

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.

all very true but you have missed the extra bit which the OP is referring to - a valid way around the 7 year rule is if the payment is made out of "excess" income then the 7 year rule does not apply since it is the relative incurring regular expenditure on behlf of someone else and as such is outside the scope of IHT

xylophone's post provides the answer relevant to the Op's question

thenudeone wrote: »

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:)

of course this is possible but we do not promote tax evasion on this board, especuially when as the Op has identified there is an accepted way to do this within the tax regulations

Franje1950

ceeforcat wrote: »

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?

Cash alone about £200k property just under £300k. We have some of my late fathers iht nil band to carry forward but it is getting rather close to having to pay inheritance tax. Have already done that on in laws side of the family. This was money they spent years of hard work earning and I dont want to add any more that way!!

HappyMJ

Franje1950 wrote: »

Cash alone about £200k property just under £300k. We have some of my late fathers iht nil band to carry forward but it is getting rather close to having to pay inheritance tax. Have already done that on in laws side of the family. This was money they spent years of hard work earning and I dont want to add any more that way!!

She needs to spend it. On anything. Go on a holiday. If family need anything then she can buy it and sell it to them for any reasonable amount.

kidmugsy

It might be wise to get her to write letters to the donees, announcing her intention to pay them from her excess income regularly, with a copy kept for her own records. The purpose is to persuade the Revenue that everything is pukkah - they are entitled to ask for evidence after her death.

le_loup

Franje1950 wrote: »

This was money they spent years of hard work earning and I dont want to add any more that way!!

I think you mean that you want more.

Franje1950

le_loup wrote: »

I think you mean that you want more.

Unfortunately that went into the governments blackhole many years ago. Just that the house was worth an inflated amount at that time. Never mind. Not going to happen again!