Reducing Inheritance tax

bdjm

To offset some of my capital that I have saved I would like to pay for new windows to be installed on my son's property (which I don't live in) which may cost up to £10,000. In the event of my passing within the next 7 years would this payment (direct to the window company) be seen as a gift and therefore included in a sum that would be taxable within this period?


I would like to do the same with the cost of a new vehicle too for him, but don't know the legalities of how this would stand. I understand a lump sum of capital transferred to my son would be seen as a gift and taxable if I passed within 7 years but how does it stand with effectively gifts such as the payment for work carried out at his property (such as the windows) or a physical item such as a car?

kidmugsy

You can make gifts of £3k p.a. exempt from IHT. If you didn't use last year's you can carry that forward. So (probably) you can gift £6k exempt this tax year and another £3k after 5/4/16.

Moreover, you can make regular gifts of surplus income e.g. quarterly. You'd have to keep your financial records in order so that your executors can make the case that the money gifted was truly surplus.

CLAPTON

bdjm wrote: »

To offset some of my capital that I have saved I would like to pay for new windows to be installed on my son's property (which I don't live in) which may cost up to £10,000. In the event of my passing within the next 7 years would this payment (direct to the window company) be seen as a gift and therefore included in a sum that would be taxable within this period?


I would like to do the same with the cost of a new vehicle too for him, but don't know the legalities of how this would stand. I understand a lump sum of capital transferred to my son would be seen as a gift and taxable if I passed within 7 years but how does it stand with effectively gifts such as the payment for work carried out at his property (such as the windows) or a physical item such as a car?

a gift in kind would obviously be considered the same as a cash gift.

if your estate is liable to IHT then if you don't give the money now your estate will pay the IHT anyway

Keep_pedalling

As as already stated if you gave him nothing in the last financial year you can take £6000 out of IHT liability immediately. If you wait until the new financial year to give him money for the car then £3000 of that is removed from your estate with emmediate effect.

If you are married your wife can also use her allowance up even if the money originates from you so between you you could gift £20,000 with up to £18,000 being emediately exempt and the remainder potentially exempt.

If per chance you son has a wedding coming up soon you could off load another £5000 each as a conditional gift.