Gifting to girlfriend for ISA: confirmation requested

ozzage

Hi expert MSEers

I think (hope) I already know the answer to this from searching the web and reading older threads on here, but would like to be sure.

Both girlfriend and I invest separately in both S&S ISAs and SIPPs. Additionally I invest into a normal fund/share trading account, as I invest more than my ISA limit annually and don't want to put everything into my SIPP as I hope to retire too early to take it!

We are wasting part of girlfriend's ISA allowance each year, because she doesn't invest enough to use it. This is rather stupid while I'm putting money into taxable accounts.

What I therefore want to do, is divert some/all of the money I put into my non-ISA trading account to fill her ISA instead and possibly also go into her SIPP. It wouldn't be a regular amount as I invest based on receiving dividends which don't arrive smoothly through-out the year. The amounts would vary, but would be more than £3000 per year which I think is relevant for IHT.

As I understand it, this will count as a cash gift, and won't result in any sort of tax liability (or need for reporting to HRMC) unless I die within 7 years (in which case IHT would be payable).

I also believe, that if I could find a way to make these payments on a regular basis (eg monthly) and show that it doesn't affect my standard of living (ie is coming out of excess income) then they wouldn't be liable for IHT even if I did unexpectedly die.

I suspect I would be required to keep records of all such gifts in either case, in case of an IHT issue.

If anybody could confirm these assumptions, and throw anything else in there that might be relevant it would be appreciated.

I'm aware that the money will belong to my GF once gifted and I would have absolutely no claim to it. That's all fine and has been fully considered.

Thanks in advance!

xylophone

There is nothing to prevent your giving as much as you like to anybody you like as long as http://www.hmrc.gov.uk/inheritancetax/pass-money-property/exempt-gifts.htm is borne in mind. You seem to have read this already?

Also, it seems to me that you cannot make the gift of the money to your girlfriend conditional on its going into an ISA or any particular investment - the money once given is hers absolutely and she may do as she wishes with it or any income arising on it - she could also sell the investments/draw out money if she chooses.

westy22

Nothing wrong with doing this as you seem to be well aware of the potential pitfalls / problems that could arise in the future.

I believe that you can only subscribe directly to another person's ISA / SIPP if they are a dependant i.e. with a Children's ISA or a wife's pension. You will probably therefore have to make a monthly SO to your GF's bank account and then she makes the payment into her ISA/SIPP from her own account.

Robin_TBW

Don't do it. Things go wrong and she's got a nice bit of cash from you.

westy22

Don't do it.

Cynic - have you never heard of true love;)

jamesd

If you really must do this, do it with a loan agreement and obligation to repay in say five years or if you die sooner, 0% interest on the loan. That way there is clear documentary evidence that while the money is hers, she owes you the money.

Robin_TBW

westy22 wrote: »

Cynic - have you never heard of true love;)

Yeah, isn't he the main guy in just about every old Disney movie?

atush

I agree with James, do it but both of you sign a paper saying the money is a loan and should be repaid at some future date.

Or, if you love her enough to give her your cash, you could always marry her:D

Robin_TBW

atush wrote: »

Or, if you love her enough to give her your cash, you could always marry her:D

Now, now - advising the guy to throw his money away isn't very productive!

ozzage

Thanks to all those with useful advice :P

It's nice that some old-fashioned people on here still think that marriage provides a stronger sign of commitment, even if the stats don't do much to support your argument All my money is left to my partner in my will anyway so I'm certainly not considering this money to be a "loan" in any way! It's just a more tax-efficient way of ensuring our future financial success

Unfortunately the government discriminates against people who don't think that marriage is a necessary part of the life of a couple, so there are certain legal/financial advantages that we are missing out on by remaining unmarried

Thanks again all I will go ahead with this with a clear conscience.

jamesd

The use of a loan agreement would also be applicable within a marriage.