Can anyone advise on this Tax question?

FlashBarry

Perfect! Thanks all.

Regarding pension - Paul pays in via a salary sacrifice scheme. Does this have any impact on this tax issue?

Savvy_Sue

FlashBarry wrote: »

Perfect! Thanks all.

Regarding pension - Paul pays in via a salary sacrifice scheme. Does this have any impact on this tax issue?

If his post-sacrifice salary is still above the limit for paying 40% tax then no, that has no impact. However, increasing his sacrifice if he's able to do so will reduce his tax liability. What you have to remember is that any severance payments would be based on post-sacrifice salary, as would income statements for mortgage loans, so sometimes it's not worth doing.

At least, that is my understanding ...

jem16

Savvy_Sue wrote: »

What you have to remember is that any severance payments would be based on post-sacrifice salary, as would income statements for mortgage loans, so sometimes it's not worth doing.

That is not always the case.

Most mortgage providers accept your reference salary ( ie the before sacrifice salary) and redundancy pay is down to the company and often based on pre-sacrifice salary.

Savvy_Sue

jem16 wrote: »

That is not always the case.

Most mortgage providers accept your reference salary ( ie the before sacrifice salary) and redundancy pay is down to the company and often based on pre-sacrifice salary.

I'll revise it then, to: make sure you know what your company would do in such situations. I believe that we gave post-sacrifice details for one colleague's mortgage application, and that was a short-term sacrifice for tuition fees.

AndyJR81

Be worth getting a deed of gift done by the family solicitor so there is a bit of proof if it was queried. I've been in practice for 8 years and have never ever seen HMRC ask for proof something was a bona fide gift.

CLAPTON

AndyJR81 wrote: »

Be worth getting a deed of gift done by the family solicitor so there is a bit of proof if it was queried. I've been in practice for 8 years and have never ever seen HMRC ask for proof something was a bona fide gift.

bizarre

there is absolutely no need for a deed of gift

parents give their children money every day of the week

indeed the purpose of children is so their parents have some-one to give their money to.

martinsurrey

AndyJR81 wrote: »

Be worth getting a deed of gift done by the family solicitor so there is a bit of proof if it was queried. I've been in practice for 8 years and have never ever seen HMRC ask for proof something was a bona fide gift.

A deed of variation would be the best option in case 3, gets around all complications of the 7 year rule and involency issues, as its as if the mother has never had the money.

John_Pierpoint

......but the deed of variation to be added to grandmothers willl would cost several hundred pounds.

I might be wrong but I get the impression that the £650,000 nil rate inheritance Tax band band for the estate of a still married parental couple should be enough to cover this example of intergenerational potentially exempt transfer (PET).

AndyJR81

CLAPTON wrote: »

bizarre

there is absolutely no need for a deed of gift

parents give their children money every day of the week

indeed the purpose of children is so their parents have some-one to give their money to.

It's for peace of mind, as I stated I have NEVER seen a cash gift needed to be justified, but it would be worth keeping a record of any large gift (in this case £15,000) for the eventual estate return anyway. Wouldn't even need a solicitor just download a template.

CLAPTON

AndyJR81 wrote: »

It's for peace of mind, as I stated I have NEVER seen a cash gift needed to be justified, but it would be worth keeping a record of any large gift (in this case £15,000) for the eventual estate return anyway. Wouldn't even need a solicitor just download a template.

well you actually wrote

Be worth getting a deed of gift done by the family solicitor so there is a bit of proof if it was queried. I've been in practice for 8 years and have never ever seen HMRC ask for proof something was a bona fide gift.

Whether or not one keeps a record of gifts to ones children is reasonably different to paying the 'family' solicitor for a deed of gift which is not needed in these normal circumstances.