Parents Paying Off Credit Card, will I be Taxed?

PMD22PMD

Hi, I've had credit cards for years and have paid the minimum amount for far longer than I should.

My Parents have offered to help me out and pay off all my remaining credit cards (Total £10,000).

I'm worried that I will have to pay tax on this? Also I receive child tax credits due to my low income, if counted as income this £10,000 will effectively put me over the limit for receiving anything and I'm worried I'll have to repay all my tax credits at the end of the year?

Any advice would be gratefully received, thank you.

g6jns_2

PMD22PMD wrote: »

Hi, I've had credit cards for years and have paid the minimum amount for far longer than I should.

My Parents have offered to help me out and pay off all my remaining credit cards (Total £10,000).

I'm worried that I will have to pay tax on this? Also I receive child tax credits due to my low income, if counted as income this £10,000 will effectively put me over the limit for receiving anything and I'm worried I'll have to repay all my tax credits at the end of the year?

Any advice would be gratefully received, thank you.

It is not subject to income tax. If your parents pay the money directly to the credit card company it will not affect your benefits.

thebritishbloke

In most instances, gifts from family members like this don't count as income. They've already paid the income tax on it, and they're gifting it to you.

thenudeone

Gifts are not classed as income for tax purposes.
Gifts (of any amount) are not subject to tax in the UK.

PeacefulWaters

Do your parents the biggest favour possible in return.

Don't build up new debts.

CKhalvashi

PeacefulWaters wrote: »

Do your parents the biggest favour possible in return.

Don't build up new debts.

My advice is to cancel the cards.

Parents will need to pay to the cards directly, as if it hits the bank, it could be seen as capital.

averageish

thenudeone wrote: »

Gifts are not classed as income for tax purposes.
Gifts (of any amount) are not subject to tax in the UK.

With regard to parents and your liability for income tax, true(ish). However, inheritance tax could potentially be applicable.

Parents can gift the £10,000, however, they must live longer than 7 years following the gift to avoid a potential inheritance tax bill on your part.

Such a gift could be liable for income tax in part also, if should you save/invest it, interest earned was to take you over the income tax threshold for the financial year in question.

I believe I am correct in the above. If you are unsure, contact HMRC for advice as these circumstances are very specific.

CKhalvashi

averageish wrote: »

Such a gift could be liable for income tax in part also, if should you save/invest it, interest earned was to take you over the income tax threshold for the financial year in question.

I believe I am correct in the above. If you are unsure, contact HMRC for advice as these circumstances are very specific.

Completely incorrect.

Only the interest would be taxable, and if OP was on a low income then an R85 could be filled in these circumstances.

The money is not from work, it is a gift, therefore it is not income, therefore it is not taxable.

PeacefulWaters

averageish wrote: »

With regard to parents and your liability for income tax, true(ish). However, inheritance tax could potentially be applicable.

Parents can gift the £10,000, however, they must live longer than 7 years following the gift to avoid a potential inheritance tax bill on your part.

For clarity, any IHT bill would be payable by the estate. They don't chase down the recipient and levy tax on money long ago spent.

Such a gift could be liable for income tax in part also, if should you save/invest it, interest earned was to take you over the income tax threshold for the financial year in question.

The capital sum itself is not subject to income tax.

King_Of_Fools

PeacefulWaters wrote: »

For clarity, any IHT bill would be payable by the estate. They don't chase down the recipient and levy tax on money long ago spent.

But what if the estate no longer has enough money to pay the IHT bill?

I would assume that in this case they would seek to reclaim this from the recipient of the gift whether it had been spent or not.

dzug1

But it's not even potentially subject to IHT


£5000 from each parent is within the exempt transfer limit -
using two years' allowances