£3000 limit for cash gifts

checker6

I know that the maximum amount you can gift to family or friends tax free is £3000 per year. Does this just relate to inheritance tax? If your total estate falls below the inheritance tax threshold of £325000 can you gift any amount of money to your family tax free? I've been searching the internet but can't find a definitive answer. Thanks in advance for any information.

getmore4less

You can gift any amount at any time tax free, there is not tax on gifts.

Gifts within the previous 7 years which don't have an exemption become pets for IHT puropses and they use up the nil rate band, increasing the potential taxaible amount in the estate.

It is quite rare for the gifts to ever get taxed if under the nil rate band.

zygurat789

getmore4less wrote: »

You can gift any amount at any time tax free, there is not tax on gifts.

Gifts within the previous 7 years which don't have an exemption become pets for IHT puropses and they use up the nil rate band, increasing the potential taxaible amount in the estate.

It is quite rare for the gifts to ever get taxed if under the nil rate band.

Or, to look at it the other way round:-

Gifts within the previous 7 years which don't have an exemption are added back to the estate, if the estate is then worth over the threshold, either £325,000 or £650,000 then 40% is charged on the excess and is paid by the estate before the beneficiaries get anything.

checker6

Thanks for the replies. The situation I am enquiring about is a relative who wants to give my two adult children some money but the total of their estate is way under the IHT threshold. The total value of their property and their savings will be below £150,000 so does the £3000 limit still apply or can they give whatever they want as a cash gift tax free?

uknick

As said, if the value of their estate, including any non exempt gifts, is below the IHT threshold at time of death, after deducting any applicable NRB, then there will be no IHT to pay.

So, assuming their estate does not increase from what you have said it is now worth, the £3k rule is moot.

However, at this time it is impossible to know what their estate will be valued at when they die; say they win the lottery or a large premium bond award etc. Nor is it possible to guess what the Government may do with regard to IHT in the future.

Keep_pedalling

Gifts are not taxed, it is only the givers estate that pays tax if that is applicable when the giver dies.

For example I gave one of my children £5000 last tax year. If I died this year the £2000 over the annual allowance would be deemed to still be part of my estate and would be subject to IHT. If on the other hand I survive another 7 years none of the gift would be taxable.

If your relative had done the same the same rules apply but because their estate is below the threshold there would be nothing to pay. Even though there would be no tax to pay he/she should keep a record of these gifts and keep the record with a copy of their will to make life easier for their executor.

If your relative had not used last years allowance then this tax year they have £6000 to play with, but that is errelivent unless they win the lottery and there assets are dramatically increased.

kidmugsy

checker6 wrote: »

I know that the maximum amount you can gift to family or friends tax free is £3000 per year.

No, quite wrong. You can gift whatever you like. The £3k is the amount that would be exempt from IHT even if you died the next day.

checker6 wrote: »

The total value of their property and their savings will be below £150,000

Then IHT doesn't matter a hoot. Whether the relative can really afford to give away sizeable sums is another matter.

Mojisola

checker6 wrote: »

Thanks for the replies. The situation I am enquiring about is a relative who wants to give my two adult children some money but the total of their estate is way under the IHT threshold. The total value of their property and their savings will be below £150,000 so does the £3000 limit still apply or can they give whatever they want as a cash gift tax free?

Tax won't be a problem - deprivation of capital might well be.

SeniorSam

The only thing that neds to be considered is that if the gifts leave that person in a position where they may need to claim benefits or be financially supported by the State, then the gifts will be looked at very closely.

Inheritance tax may not be an issue at all, but deprevation of assets in needing to have Care and support, will bring it back on those who have received the gifts.

If in doubt, take legal advice.

Sam

midge406

Does the seven year rule apply if the person who gifted the money goes into a care home?

le_loup

There is no time limit for assessing whether deprivation of capital has occurred.