Bank of Mum and Dad to the rescue??

holly_hobby

No, there's no tax on giving or receiving a gift whilst the Donor is alive.

Annual IHT tax exempt gifts are 3k per person per tax yr (ie 6 April 2012 - 5 April 2013), with HMRC permitting the carry forward of 1 yrs unused allowance. The 5k Wes. mentions, is in relation to exemption for a gift on marriage by each parent.

If the Donor dies within 7 yrs of making the gift, and the gift exceeds the above exemption figs (different procedure if the value of the gift itself exceeds the nil rate band), the balance is considered for HMRC purposes, as remaining part of the deceaseds estate for IHT calc purposes.

Of which the decds estate will only be exposed and liable to an IHT bill, if its net value (inc the re-inclusion of all PETs), exceeds the nil rate threshold (currently 325k per individual). Its also important to note that in the case of spouses the unused IHT nil rate band of the 1st decd can be transferred and aggregated with the surviving Spouses own nil rate allowance - giving a potential nil rate threshold on 2nd death of upto 650k.

Hope this helps explain, and if you may need to make any considertion if the capital sum isn't formally recorded as a loan (in which case it would be determined by HMRC as a PET on death within 7 yrs of the donation).

Holly x