Additional Tax On A Gift?

youtellme90

I'm in the lucky position of being offered a reasonable sum of money as a gift from my parents.

Their, and my only worry is what are the tax implications?

I currently pay tax at basic rate, will I have to pay 20% on this gift as well? Even worse - if the gift brings me into the higher rate - will I need to pay 40%?

dzug1

It's not income, it's a capital payment - therefore no income tax

There are potential Inheritance tax implications should your parent not survive 7 years and leave an estate, including the gift, above the threshold.

Should your parents have to sell an asset to raise the gift money, then there is a capital gains tax potential for them

John_Pierpoint

If your parents are anticipating being financed from taxation, for example getting a subsidy towards care home fees, there could be a claim for "deprivation of assets".

le_loup

I have just done a search on this forum with the find exact words "tax on gifts", headers only. There were 20 threads with that exact title.
It was really easy. Why do others find it SO hard?

zygurat789

le_loup wrote: »

I have just done a search on this forum with the find exact words "tax on gifts", headers only. There were 20 threads with that exact title.
It was really easy. Why do others find it SO hard?

What really puzzles me is why anyone should even think that a gift is taxable, if it were there would be lots of publicity and schemes for (legal) tax avoidance.

dzug1

zygurat789 wrote: »

What really puzzles me is why anyone should even think that a gift is taxable, if it were there would be lots of publicity and schemes for (legal) tax avoidance.

A lot of people work on the logic that any money they receive is 'income', know 'income' is taxed and leap to the wrong conclusion

System

Many countries do have a gifts tax, and this government is not slow in thinking of ways to tax people. Therefore if you have never encountered this before, it is a reasonable question to ask.

System

Definitely no income tax on a one off cash gift. I fully understand that.

However, can anyone clarify if there would be any income tax liability on a regular cash gift (i.e. if I set up a monthly standing order to my sister?). I have read other threads that state there is potential income tax:

e.g https://forums.moneysavingexpert.com/discussion/comment/63657630#Comment_63657630

I can't see this myself, but thought I would run it by the forumites here. Reason I ask is that I am going to do the same as the OP in that thread (sister offsets my mortgage in her own account and I will pay her the interest I have saved on my mortgage by monthly standing order...). I hadn't thought it a problem until read that thread!

le_loup

No. NO. NO.
THERE IS NO TAX ON GIFTS. FULL STOP!

CLAPTON

teepee83 wrote: »

Definitely no income tax on a one off cash gift. I fully understand that.

However, can anyone clarify if there would be any income tax liability on a regular cash gift (i.e. if I set up a monthly standing order to my sister?). I have read other threads that state there is potential income tax:

e.g https://forums.moneysavingexpert.com/discussion/comment/63657630#Comment_63657630

I can't see this myself, but thought I would run it by the forumites here. Reason I ask is that I am going to do the same as the OP in that thread (sister offsets my mortgage in her own account and I will pay her the interest I have saved on my mortgage by monthly standing order...). I hadn't thought it a problem until read that thread!

Whilst there is no tax on gifts
in this case it isn't really a gift : it is a payment for benefit to yourself.

John_Pierpoint

What are the chances that either your current account or that of your sister might get investigated by HMRC ?

You are proposing a simple form of peer to peer lending, the concept of "family" is little recognised by tax law here in the UK, though in some traditional states in the USA , such relationships are recognised.
[A pair of homosexuals have recently entered into an adoption relationship, to reduce tax.
Back in Victorian times a great.........great aunt of mine had to pay a 9% tax on her inheritance from her mother, a fine for being born illegitimate; I would be interested to know how long such a law endured here in the UK].

There used to be some flexibility on the part of tax inspectors to recognise the reality of such family relationships, but as computerisation has made the process increasingly detailed and mechanistic, I would think that such realism is being reduced.