Handling parents' savings

Tiglet

My parents are both retired and have been living abroad for several years. However, they have just told me that they still have a bank account in the UK with quite a few thousand in it.

They have suggested that I might be able to put the money into a savings account in my name as they can't do it in their own names.

Although I'm perfectly happy to do this, I haven't a clue what effect this will have from a tax point of view. If they give me money, will it be treated as income? And what about when I give it back? If there's any tax to pay, it will probably be more than the value of the interest, so it won't be worth the bother. (I know the interest will be taxed as my income but that's fair enough).

I've never had to think about things like this before, so I'd appreciate any help/advice/pointers/ anything really.

Thanks

Torry_Quine

Do you have power of attorney for them as without this you aren't going to be able to do anything?

Tiglet

No. I think their idea is that they transfer the money to me, I put it in a savings account and then give it back at some point in the future.

Edinburghlass_2

In that case it will be your money and you are liable for any tax due on the money.

ETA it will also be considered your money if claiming any tax credits etc

Tiglet

Thanks. That's a good point about tax credits. Not a problem at the moment but it could be in the future.

My main concern, though, is whether it counts as my income when they give it to me and then their income when I give it back. If it does, then most of it will be swallowed in tax.

scotsbob

They could transfer it to an account in the country where they are now resident and then immediately transfer to an off shore account.

Tiglet

I think that this is what they want to avoid. As I understand it, they will be liable to be taxed on it if they move it abroad but not if they leave it here. (They are not resident here for tax purposes)

Farway

Tiglet wrote: »

Thanks. That's a good point about tax credits. Not a problem at the moment but it could be in the future.

My main concern, though, is whether it counts as my income when they give it to me and then their income when I give it back. If it does, then most of it will be swallowed in tax.

It will not count as your income, it is treated as a "gift" and there is not a gift tax. As pointed out though it will count as your assets if claiming any benefits etc

It could also be taken into account as part of parents assets should they die within 7 years of "gifting" it to you [inheritance tax] , but this will depend upon size of the estate, and presumably the laws of the country they are domiciled in for tax purposes

As will tax when / if you give it back, the tax laws of the country tax domiciled in will apply to your parents, unlike UK some countries do have a "gift tax"

Tiglet

Thanks very much! :beer:

That's answered my question nicely. I don't know about the tax rules where they are, but I can give them the information and they can make up their minds what to do.

And thanks for the link to inheritance tax too. It's not a nice subject but, realistically, it's something I'll be needing to learn about.

agrinnall

Why can't they put the money into a savings account in their own names? While it may be difficult (but probably not impossible) to open a completely new account from overseas, when they already have an account at a UK bank I would have thought opening a savings account at the same institution would be reasonably straightforward. And if they have no other UK income then the interest can be paid gross.

Savvy_Sue

We've mentioned implications for death and benefits, not for divorce, should that ever be relevant. Money in an account in your name is treated as yours, and would have to be declared in that scenario too.

Also don't think (or let them think) that you can do this, then hand it back just before anyone requires you to answer questions about your savings. They can and will ask for some historic statements, not just the most recent one.