Gifts and Inheritance tax

pas

I understand up to £3000 may be given away each year tax free and tax payable on amounts above that if you die within 7 years. However is it possible to give any amount tax free if you don't die within this period, or does the recipient have to declare this as income and therefore pay tax. For example, is it possible for me to give my daughter say £8000 and neither she nor I pay tax on this providing I live for at least another 7 years?

CLAPTON

You can give any amount of money away without any immediate tax implications.

The tax implications mean however that if its greater than 3000 per year and you die within 7 years then this money is added to that of your estate.

If your total estate (with the gifts added) is greater than the IHT allowance (currently 300,000) then the estate will be liable for IH tax.

Your daughter as such has no tax implications, its the estate that will pay the tax.

If you live for more than 7 years then the money you have given away is not added back to your estate.

Of course if you dont give the money away, it will then form part of your estate, so when you die it will be taxed anyway.

In my opinion and not knowing all the facts of course, I'ld give her the money.

noh

There is no tax on gifts.
more info on inheritance tax exemptions can be found here:-http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/InheritanceTaxEstatesAndTrusts/DG_10010612

If you gave your daughter £8000 there would be no tax liability on her part. You can carry forward the £3000 exemption for 1 year, assuming you didn't use it last year, £6000 would be exempt. So the only potential IHT liability is on £2000 if you died within 7 years and your estate is above the threshold.
As Clapton said if you don't give it away it may be taxed anyway.

Nigel

pas

pas wrote: »

I understand up to £3000 may be given away each year tax free and tax payable on amounts above that if you die within 7 years. However is it possible to give any amount tax free if you don't die within this period, or does the recipient have to declare this as income and therefore pay tax. For example, is it possible for me to give my daughter say £8000 and neither she nor I pay tax on this providing I live for at least another 7 years?

Thanks noh and clapton for your replies.

It seems to me then if one had lots of money (which I don't) and one had more than one child (which I do) then giving all of them say £100,000 each would be of massive benefit providing there was sufficient left to live to the lifestyle that was desired.

Perhaps this is what rich folk habitually do.

moonrakerz

pas wrote: »

Perhaps this is what rich folk habitually do.

They also have the resources to pay lawyers to find and exploit all the little loopholes in the tax regime. As soon as the Government closes one, they find another !

kevin0410

What if you drew a large sum of cash out and gave it to somebody. How is it possible to trace where it went? Surely you could say you gambled or frittered it away?

Cook_County

kevin0410 wrote: »

What if you drew a large sum of cash out and gave it to somebody. How is it possible to trace where it went? Surely you could say you gambled or frittered it away?

The Executors have a duty of trust to complete the IHT return based on the best information they can obtain.

If I was the recipient of "a large sum of cash" I would have difficulty banking it these days in any case, so your plan would probably fall at the first hurdle.

bargain_hunter77

so could my brother transfer £20,000 from his business/bank account into my bank account?? Would either of us have to pay any tax or declare it to anyone???

nb - would he have to pay tax ?? (as he is a owner of a business??)

amandathepanda

I am interested in this thread. My Dad is selling his bungalow, he is 73 and is moving in to a flat. He will be left with about £100,000 equity which he wants to split between me, my brother and my sister. From what I understand that is okay as long as I look after Dad really well for the next 7 years. If he dies within that timescale what sort of tax figure are we talking about? I hate talking about it but we don't want to be left with a large tax bill at a later date.

moonrakerz

bargain_hunter77 wrote: »

so could my brother transfer £20,000 from his business/bank account into my bank account?? Would either of us have to pay any tax or declare it to anyone???

nb - would he have to pay tax ?? (as he is a owner of a business??)

Yes ! he would have to pay income tax on it.

Once he has the money in his bank account (assuming he has declared it as income) he can do what he likes with it.

moonrakerz

amandathepanda wrote: »

I am interested in this thread. My Dad is selling his bungalow, he is 73 and is moving in to a flat. He will be left with about £100,000 equity which he wants to split between me, my brother and my sister. From what I understand that is okay as long as I look after Dad really well for the next 7 years. If he dies within that timescale what sort of tax figure are we talking about? I hate talking about it but we don't want to be left with a large tax bill at a later date.

If he gives you money:
For the first 3 years all of it may be liable for IHT (if the total estate is large enough, £300,000 this year)
3 - 4 yrs 80%
4 - 5 yrs 60%
5 - 6 yrs 40%
6 - 7 yrs 20%
7 + yrs 0%

Don't forget, the estate is liable for any Tax due - not yuo !