Parents want to give me some money?

gillybean129

Don't know if I'm in the right forum or not. I just want some general advice, my parents are in their 70's and have built up around 42K of savings and shares etc, they have little need for this and want to gift me and my husband some money, the reason is that we're extending our house and doubling our mortgage and they say they would rather see us use this money now rather than later.

What are the limits/implications of this, is it classed as asset disposing?

Are they able to do this, after all it's their money I thought I saw something about a 3K limit on gifting but I may have got that wrong (IHT)?

Thanks in advance

Madmel

I'm NOT an expert, but I know that each parent can give £3000 per tax year to their children and it not be taxed on their death. Also, I'm sure that there is another rule which says that providing cash is given from EARNINGS as opposed to CAPITAL, more can be given. However, it must not materially affect the standrad of living of the giver.

My Dad gave me a lump sum a couple of years ago, along with a letter which said something along the lines of "... the sum of £xxx is paid to you from a dividend I received from xxx company. I confirm that I have retained my pensions, so this is extra income..." etc etc.

My Dad has taken advice on this, and has always given me a signed dated letter along with any money he has given me, in case the taxman asks.

If your parents do give you some money, and they then die within 7 years, the longer they survive, the less IHT you have to pay as it is on a sliding scale.

Sorry not to be more specific, but I hope it works out for you. M

gingercordial

Basically each parent can give you £3,000 per year with no IHT. If they didn't give you any last year, they can use that allowance now (just one year back though). So that gives you £3,000 x 2 years x 2 parents = £12,000 with no IHT to worry about at all.

The £30,000 on top of that will not be caught by IHT IF your parents live for another 7 years. If they die before that, then there may be some tax to pay. However to work this out you will add the £30,000 to everything else your parents leave you. Each parent has an allowance on death of approximately £300,000. If it's likely that the total your parents leave you will be more than this, you might want to consult an accountant/tax adviser. See https://www.tax.org.uk to find one in your area.

Madmel is right, there are extra allowances for giving gifts out of your income, but handing over money that's sat in savings accounts/share portfolios probably isn't going to qualify for this.

Hope this helps - just as a warning you really should take proper advice, I am a tax adviser but obviously I don't know all of your circumstances so this is only for general information.

gillybean129

Many thanks to you both as they have no income, just state pensions, this would be unearned and I guess taxable, but the £3000 rule is plenty, just one more question, you say £3000 for this tax year and LAST year, how far can we get into this tax year before last year becomes a problem?

gingercordial

gillybean129 wrote: »

Many thanks to you both as they have no income, just state pensions, this would be unearned and I guess taxable, but the £3000 rule is plenty, just one more question, you say £3000 for this tax year and LAST year, how far can we get into this tax year before last year becomes a problem?

You've got all of this tax year to use last tax year's allowance... basically until 5 April 2008 you can use your allowance for 2006/07 (last tax year) and 2007/08 (this tax year). On 6 April 2008 the 2006/07 allowance will expire, so you'd then have to use 2007/08 and 2008/09. Hope that makes sense.

Do make sure they haven't made any other gifts in those years to you/your siblings/anyone else that might have used up the allowances first!

seven-day-weekend

So myself and my husband could give our son £12000 this year with no comebacks?

gingercordial

seven-day-weekend wrote: »

So myself and my husband could give our son £12000 this year with no comebacks?

If you haven't given him any other gifts in the last tax year (6 April 2006 - 5 April 2007) or so far in this one (6 April 2007 to now) then yes. And next year (after 6 April 2008) you can give him another £3,000 each. And so on.

However, seven-day-weekend I see from your location (and from some of your other posts) that you live in Spain now. I have no idea if you are Spanish-resident for tax purposes and therefore whether any additional Spanish rules could apply to you. The £3,000 per year (and previous year) rule is quite straightforward in the UK IHT rules so you should be safe, but I really would advise you to get proper advice if you are (or think you might be) Spanish tax-resident.

seven-day-weekend

We will be resident for tax purposes in August this year (except that my husband's Teachers Pension - our main income - has to be taxed in the UK).

However, I was asking for when we return to the UK as residents, which will probably be in a year or two.