Gifting my mother

Swissie

Hey everyone I just have a quick query about tax liabilities. I am no tax expert so I do apologise if this is a ridiculous question

My sister and I are looking at giving our mum £10,000 each to help her out financially (£20,000 in total - sorry I know some of you will roll your eyes at me for stating the obvious). We want to put this into a savings account for her so that she has access to it. We recently received a cash gift from our dad and we would like her to have some of it to help out as we've never really had much money before (we live with our mum).

Now I understand the implications of IHT (if the overall inheritance value is over £325,000 and if my dad died within 7 years). But is there any tax implications for us passing on £10,000 each to our mum? Do we have to pay any tax or does my mum have to pay any tax on this amount?

Any help would be greatly appreciated and sorry if this is an obvious question but I can never keep up to date with all the tax changes etc and I had a look but couldn't find anything about this situation (only parents giving to children rather than the reverse).

Many thanks in advance for any help

McKneff

There are no tax implications of gifts to your mother by her or by you and your sister.

And nice people for looking after your mam.:T:T

As long as you and your sister are not claiming any means tested benefits, it's fine.

And be careful if your mam is claiming any means tested benefits because of course it will affect her benefits.

xylophone

You and your sister have received gifts from your father.

That money is yours absolutely.

You may make gifts of any amount to anyone you choose but be aware of the implications for your own estates in respect of IHT.
http://www.hmrc.gov.uk/inheritancetax/pass-money-property/exempt-gifts.htm

The £3000 gift exemption may well cover the bulk of the gifts you and your sister propose.
Annual exemption
You can give away gifts worth up to £3,000 in total in each tax year and these gifts will be exempt from Inheritance Tax when you die. You can carry forward any unused part of the £3,000 exemption to the following year, but if you don't use it in that year, the carried-over exemption expires.

Is your mother using her ISA allowance? (£5640 currently rising to £5720 in the tax year beginning April 6).

Is she eligible to complete an R85 for other accounts? If not see
http://www.hmrc.gov.uk/tdsi/ten-per-cent-guidance.htm remembering that the allowance figures in examples are out of date. http://www.hmrc.gov.uk/rates/it.htm

Swissie

Thank you Mckneff for your response my mum has looked after me for a long time so it is only fair we look after her too and it feels good being able to finally do so.

In reply to your statement both my sister and I work full time (although I only have a temporary contract) and so does my mum. We don't claim any benefits; my mum used to get some help while holding a full time job when we were younger (she might have got working tax credits or child tax credits or something like that) and I used to get EMA when I was in college but that is the only benefits we have had. Nothing for the past 4-6 years though.

I just don't want to go to the bank tomorrow uninformed in case they ask lots of questions about the tax liability of the money being transferred. So thank you very much for your response

Thank you also xylophone for your answer but considering me and my sister combined are not worth anywhere near £325,000 even if we die in the next 7 years I guess IHT would not be something to worry about because I thought that cash gifts over £3000 were only considered for IHT if the net worth of the person deceased (who sent that cash sum within 7 years) is worth over £325,000 and may have sent that money to reduce or eliminate IHT. Therefore correct me if I am wrong but if someone sent £10,000 to someone and died the next year, £3,000 would be exempt and £7,000 would be liable for IHT depending on the total assets of the person deceased (which would include this £7,000 which was not exempt) - sorry if that makes no sense at all (it does in my head haha)

If I have made a mistake please feel free to correct me and thank you once again for your kind help

nomunnofun

Swissie wrote: »

Thank you Mckneff for your response my mum has looked after me for a long time so it is only fair we look after her too and it feels good being able to finally do so.

I just don't want to go to the bank tomorrow uninformed in case they ask lots of questions about the tax liability of the money being transferred. So thank you very much for your response

Thank you also xylophone for your answer but considering me and my sister combined are not worth anywhere near £325,000 even if we die in the next 7 years I guess IHT would not be something to worry about because I thought that cash gifts over £3000 were only considered for IHT if the net worth of the person deceased (who sent that cash sum within 7 years) is worth over £325,000 and may have sent that money to reduce or eliminate IHT. Therefore correct me if I am wrong but if someone sent £10,000 to someone and died the next year, £3,000 would be exempt and £7,000 would be liable for IHT depending on the total assets of the person deceased (which would include this £7,000 which was not exempt) - sorry if that makes no sense at all (it does in my head haha)

If I have made a mistake please feel free to correct me and thank you once again for your kind help

That would be a reasonable asumption to make although you could also bear in mind what xylophone had suggested with regard to the previous year's unused gift exemption (although I do not suppose, in most cases, that the recipient would be aware of this.)

getmore4less

If you use this year, previous year, and next years(April 6), that will cover £9k. if you have a partner not using their gift allowance hat would cover another £9k.

Not that this is a issue if your estates are below the nil rate band,

Don't forget that couples(maried/civil partners) can combine their nill ratee bands.

Swissie

Thanks nomunnofun and getmore4less I will bare this in mind but like is said I am we'll below the nil rate band so I don't think I have anything to worry about when gifting £10,000.

Just out of pure interest how would it work in the case of someone worth over 325,000 that would gift a family member before death? Would the recipient have to declare it to HMRC? Or would HMRC know that they received this cash gift and call it up?

I am just interested about how HMRC actually keeps up with people receiving cash gifts if people do not declare it

Mojisola

Swissie wrote: »

Thanks nomunnofun and getmore4less I will bare this in mind but like is said I am we'll below the nil rate band so I don't think I have anything to worry about when gifting £10,000.

Just out of pure interest how would it work in the case of someone worth over 325,000 that would gift a family member before death? Would the recipient have to declare it to HMRC? Or would HMRC know that they received this cash gift and call it up?

I am just interested about how HMRC actually keeps up with people receiving cash gifts if people do not declare it

The person who received the gift wouldn't pay inheritance tax but the estate may be liable to pay. The executors have to find out if what gifts have been made by the deceased.

Swissie

Thanks Mojisola I was just interested to know how it all happens.

Just so that I am 100% sure then, my mum doesn't have to ring up HMRC to mention she has received £20,000 does she?

Mojisola

Swissie wrote: »

Thanks Mojisola I was just interested to know how it all happens.

Just so that I am 100% sure then, my mum doesn't have to ring up HMRC to mention she has received £20,000 does she?

No. It would only be of interest to anyone if she was on means tested benefits when the DWP would need to be told.

getmore4less

Swissie wrote: »

Just out of pure interest how would it work in the case of someone worth over 325,000 that would gift a family member before death? Would the recipient have to declare it to HMRC? Or would HMRC know that they received this cash gift and call it up?

I am just interested about how HMRC actually keeps up with people receiving cash gifts if people do not declare it

HMRC don't have a clue what has happened in most cases.

HMRC are dependant on the honesty of the personal representatives(PR) of the estate to look for potential gifts and fill in the appropriate forms.

In many cases the PRs will just ask the relatives if they got any gifts in the last 7 years some(not many I expect) go a bit further and analyse 7 years worth of bank statements looking for potential gifts.