Gifts and tax

d712

Hello

What are the rules regarding cash gifts to relatives and its tax implications?

For example if I wanted to make a cash gift to a relative is there a limit to much it could be and how often I could do it (assuming it was the same recipient each time)?

At what stage would the recipient be liable to pay tax on what they have received?

Thanks

getmore4less

There is no gift tax.

As the gifts can be potentially exempt transfers(PETs) if they don't fall under one of the gift exemptions they may not reduce the estate of the donor for 7 years.

purdyoaten

d712 wrote: »

Hello

What are the rules regarding cash gifts to relatives and its tax implications?

For example if I wanted to make a cash gift to a relative is there a limit to much it could be and how often I could do it (assuming it was the same recipient each time)?

At what stage would the recipient be liable to pay tax on what they have received?

Thanks

At no stage will the recipient have to pay tax on the gift.

holly_hobby

There is no tax liability to the recipient on receipt of the gift - regardless of its size or your relationship.

However, anything os of the exempt gift allowances (annual, marriage or regular from income and not affecting lifestyle), is essentially classed as a Potentially Exempt Transfer (PET) in respect of the Donor, which would be an issue for you (or rather your estate) only if you die within 7 yrs of the donation AND your net (of liabilities) estate exceeds your available nil rate band (currently and upto April 2017, at 325k per person, or upto 650k if there is unused prev deceased spousal exemption, availalble for transfer upon request to HMRC by the executors of your/donor's estate, upon your/their death).

If the net estate of the deceased is likely to exceed the nil rate band and they want to ringfence the available capital for beneficiaries, there is provision that can be made (which should be written under trust if effected by yourself) - IF this is relevant to you I will discuss further, but won't just yet to avoid confusing issues.

Hope this helps

Holly

xylophone

http://www.hmrc.gov.uk/inheritancetax/pass-money-property/exempt-gifts.htm

See above for information.

d712

purdyoaten wrote: »

At no stage will the recipient have to pay tax on the gift.

Thanks for the responses. On the hmrc website theres something about being able to pay gifts of up to £3000 a year.

What does this apply to?

Thanks

Mojisola

d712 wrote: »

Thanks for the responses. On the hmrc website theres something about being able to pay gifts of up to £3000 a year.

What does this apply to?

Inheritance tax.

https://www.hmrc.gov.uk/inheritancetax/pass-money-property/exempt-gifts.htm#2
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.

d712

Mojisola wrote: »

Inheritance tax.

https://www.hmrc.gov.uk/inheritancetax/pass-money-property/exempt-gifts.htm#2
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.

Thanks for the response. So what are the tax implications if my parents each gave me £4000 as a gift this year and God forbid died within seven years?

zygurat789

d712 wrote: »

Thanks for the response. So what are the tax implications if my parents each gave me £4000 as a gift this year and God forbid died within seven years?

None because they can use last years as well total £6000.
Would £7000 suit your query better?

CLAPTON

d712 wrote: »

Thanks for the response. So what are the tax implications if my parents each gave me £4000 as a gift this year and God forbid died within seven years?

you have been given the answer but consider the tax implications if they didn't give you money are they died?

in that case the money would be part of their estate and fully taxed, by giving it away the estate is never worse off but is better off if they live the 7 years.

it's a no brainer to give the money away

agrinnall

If your parents' estate is valued at less than £650,000 then it's likely that there would be no IHT to pay anyway.