gift giving tax?

proevofanatik

I have an uncle that has won £1 million on a scratch card. He is terminally I'll and possibly has months to live. He said that he is going to give all his family a share of this money and said that I am going to get £10k. I've heard that if he gives me money and dies within 7 years I would need to pay 40% tax. Is there any way round not paying tax on it. Is there some advice that I could give him to stop this from happening?

jem16

proevofanatik wrote: »

I've heard that if he gives me money and dies within 7 years I would need to pay 40% tax. Is there any way round not paying tax on it. Is there some advice that I could give him to stop this from happening?

There is no tax on gifts in the UK so technically it's not you that will be due any tax to pay.

However with £1m his estate will be due Inheritance Tax and any gifts given within 7 years of his death would still be counted as being part of his estate.

Perhaps encourage your Uncle to see a professional before giving the gifts.

getmore4less

He should just keep some back to pay the IHT.

Keep_pedalling

Is your uncle married?

Does he have any other major access such as a house?

Has he already claimed his prize?

xylophone

Does he have any other major access such as a house?

Assets?

Has your uncle made a will?

http://www.step.org/member-directory

https://www.gov.uk/inheritance-tax

He should take expert advice- example from googling http://www.sm-financialservices.co.uk/financial-services/inheritance-tax-planning/

https://www.unbiased.co.uk/ - to find IFA

CLAPTON

proevofanatik wrote: »

I have an uncle that has won £1 million on a scratch card. He is terminally I'll and possibly has months to live. He said that he is going to give all his family a share of this money and said that I am going to get £10k. I've heard that if he gives me money and dies within 7 years I would need to pay 40% tax. Is there any way round not paying tax on it. Is there some advice that I could give him to stop this from happening?

if he is single then his estate will pay tax on the amount over £325,000 including all gifts within the last 7 years (taper relief might apply but not if his death is within 3 years.


If he is married then it might be better to leave everything to the wife and let her give money away as she may live for 7 years

In any event you don't actually pay any tax: the estate will pay the tax assuming there is sufficient left to pay.

Morganic

Jem, there is a little more to it than that. If someone gives away a million and then dies within seven years, IHT will be due on that - 40% of (a million minus the 325K nil rate band)

Normally that IHT is paid from the estate but if the estate has insufficient funds to pay the IHT, then HMRC can go after the recipients of those gifts for the tax.

That is not to say that will, but that they could. In practice it would probably depend on what they know about the gifts, how much tax is due, whether they can find the recipients, where the recipients are located and how probable HMRC think that they will be able to collect.

But it's worth bearing in mind that in such a situation you could be liable for 40% of the value of that gift, so it might be a good idea to keep 4K in cash until probate is resolved.